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Uranium: A Key Element for a Net-Zero Carbon Future

Uranium: A Key Element for a Net-Zero Carbon Future

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September 14, 2021 | (60 mins 42 secs)

Uranium spot prices have been rising in 2021, in what we see as a strong new bull market. Investors are betting on nuclear energy’s profile as a highly efficient, reliable and clean energy source. Aggressive decarbonization goals worldwide are driving major policy shifts that are likely to bolster demand for uranium and nuclear energy. In this webcast we discuss:

  • The case for uranium and market outlook
  • Key catalysts for growth in nuclear energy and uranium demand
  • Contextualizing the safety of nuclear energy
  • What is a net-zero carbon future? Why uranium?
  • Launching the Sprott Physical Uranium Trust

Featured Speakers

Edward C. Coyne
Edward C. Coyne
Senior Managing Director, Global Sales
Sprott Asset Management
Per Jander
Per Jander
Technical Advisor to Sprott Physical Uranium Trust
WMC Energy B.V.
John Ciampaglia
John Ciampaglia
Chief Executive Officer
Sprott Asset Management

 

Webcast Transcript

Natalie Noel, RIA Database: Cover Slide

Hi everyone and thank you for joining us for today's webcast; Uranium: A Key Element for a Net-Zero Carbon Future, sponsored by Sprott Asset Management. Today's webcast will be providing one CFP, one CIMA, and one CFA CE credit. If you have any questions on credit, please don't hesitate to give us a call at 704-540-2657. We welcome any questions you may have at any point in time during today's webcast. You can type your questions in the Q&A box to the right of the slides, and we'll do our best to get to as many of your questions as possible. In the event your question is not answered during today's event, a member of the Sprott Asset Management Team will get back to you directly.

We have made materials available for you to download in the Documents folder at the bottom of your screen. And as always, we appreciate your feedback and are striving to make these events the best they can be for your viewing satisfaction. At your convenience, please take a moment to take our survey that is also located at the bottom of your console. We will cover quite a bit of information during today's webcast. If at any point in time you're interested in scheduling a one-on-one meeting with Sprott Asset Management, please click the one-on-one folder at the bottom of your screen and confirm that request.

And in the event you missed any part of today's webcast, or simply would like to watch it again, a replay will be made available and all registrants will receive that information by email. With that, I'd like to go ahead and turn it over to today's first speaker, Ed Coyne, Senior Managing Director Global Sales for Sprott Asset Management. Ed, take it away.

Ed Coyne: Slides 2-5 Introduction

Ed Coyne: Thank you, Natalie, and thank you all for joining us today. I think you're going to find that today's webcast is going to be unique and informative. Again, my name is Ed Coyne, Senior Managing Director at Sprott Inc. And with me today are two special guests, first, we have Per Jander, from WMC energy. Per joined WMC energy, with a broad background in the energy sector spanning more than 20 years. Per has worked in the nuclear power plants fleet management, investment planning, and new build programs and utilities in Sweden, and Switzerland. At WMC, Per focuses on business development, commercial engagement and serves as frost technical advisor for all things uranium as it relates to our Sprott physical uranium trust. Also with me today is John Ciampaglia. John joins us today with more than 25 years of investment industry experience and serves as the Chief Executive Officer of Sprott Asset Management, and is a Senior Managing Director at Sprott Inc. John earned his Bachelor of Science in economics from York University and is a CFA charter holder.

On today's webcast, I want to focus really on several key points. And we're going to start with Per and talk about the case for uranium in the market outlook. I will also ask Per to cover some key catalysts for growth and nuclear energy, as well as divide fact from fiction on the safety of nuclear energy. Then we'll turn our attention to John Ciampaglia, who will take a look at, what a net carbon future might look like, as well as outline some of the key benefits and differentiators of this Sprott Physical Uranium Trust. And then finally, before we move to the Q&A session, which I'm happy to say, as many questions that have already come in, I will highlight a few talking points on how to think about not just real assets in general and precious metals, but more specifically, how uranium can work as a diversifier within your portfolio.

Now before we turn to the bulk of the presentation, for those that are not familiar with Sprott, I want to give you a quick highlight of who we are. Sprott is a global leader in precious metals and real asset investments, with over 18 billion in assets and over four decades of experience. We're really the leader in the precious metals real asset market. We're a publicly traded company and we trade both on the New York Stock Exchange and the Toronto Stock Exchange under the ticker symbol SII. At Sprott, we offer a full suite of solutions, whether you're looking to allocate to the physical market, through one of our physical bullion trusts, whether it's gold, silver, platinum and turret, and palladium, and most recently, the uranium, as well as our manage equities, whether it's an actively managed mutual fund, or a factor base ETS, or separately managed accounts. In addition, we offer lending as well as brokerage services, all focused on the real asset precious metals market.

And for today's particular webcast, I want to focus our attention on the Sprott physical uranium trust. On page five, I just included a few highlights on what makes this trust unique. First and foremost, it's new, it launched back in July of this year 2021. It's the largest and most and the only physical uranium fund currently in the marketplace. And like all of our trusts, it provides a secure, convenient, exchange traded investment alternative, investors who want to own physical uranium, or in other cases gold, silver, platinum, and palladium. And Sprott, the firm serves as a Trust manager and is backed by more than four decades worth of physical commodity investment experience. With that, I'd like to now turn our attention to the webcast and go on about what we want to talk about today, which is uranium. And I've asked Per to really start us off from WMC energy to talk about the investment case for uranium. Per, thank you for joining us today.

Per Jander: Slide 7 - Why Invest in Uranium Now?

Thanks so much. Thanks for having me. I'm quite excited to talk about this here today. Just outlining a little bit, what I'm going to talk about is, first of all, any discussion on the uranium market, you're going to have to talk about nuclear energy as well. I'll talk a little bit about what makes it unique, what's driving the renewed interest in it. And I think what's going to become obvious here in the coming few years is that it is a crucial technology, and it needs to play an important role if society is serious about decarburization. I'll also touch a little bit on the uranium market, the recent price developments, what products are out there, and a little bit about the traditional market and also how it's been changing recently, with some new nonutility buyers coming in and causing quite a bit of a stir over the last year or so.

Looking a little further, there is obviously quite a lot of mines that have been idled recently because there's been a period of low prices for a little bit. And finally, also add to that the recent policy changes across the globe and all the factors combined, they make it a very interesting time for uranium in general.

Per Jander: Slide 8 - Nuclear Energy is Reliable

Looking at nuclear energy in general, what makes it unique? I think one main factor that stands out is the capacity factor we will talk about. It essentially means how much energy do you get out of a power station, I call it most of the time is it operating? Obviously, they have intermittent sources as wind power and solar power that are subject to the environment when they can actually operate and then you have more power stations with an on button, basically uranium or nuclear energy that tends to be on all the time, because it's obviously a big upfront investment and once it's running, you just keep it on.

And then add to that, the fossil fuels power stations as well, which also can have a high capacity factor. But most of the time the cost of operating it is a little too expensive. Whatever your fuel costs might be driving your behavior to not operate it all the time. But looking at nuclear energy, with an extremely high capacity factor, it creates a backbone in most electricity systems in countries where they are present.

Ed Coyne: Per, I think it is a great point to talk about… sorry for interrupting you. I do think that's a good point to talk about, because so often people think about alternative energy, just for what it costs us to use, but few people actually talk about what it costs to produce. And I think that's an important point to highlight. And to your point there, the capacity factor is a really important talking point and talking about nuclear in general relative to some other clean energy options that are out there.

Per Jander: Slide 9 - Nuclear Energy is Efficient

Oh, absolutely, it's a baseload technology, which means that it's going to be on there all the time, 24/7, and with an extremely low operating cost from a fuel perspective, it's quite insensitive to price changes. Once you have the nuclear power station built, it's going to be there, and it's going to deliver energy for the lifetime of it. It's a very good complement to other renewable energy sources that might not be as reliable but certainly interesting from a low carbon perspective.

Ed Coyne: And to your next point here, the efficiency factor is incredible, walk us through Slide 9.  I think this is a great visual of how efficient uranium or nuclear truly is.

Per Jander: Yes, I mean, it's quite mind-boggling, you're absolutely right, obviously it uses a different kind of energy. When you compare nuclear energy to chemical energy that other fossil fuels are using, it's order of magnitude difference. The concept is still quite similar, it's like you split atoms to create friction energy from a fission product, you harness that energy to boil water. Even though it's a very serious technology or a very advanced technology, it's still just a fancy tea kettle, if you will, and then you use the water to drive a turbine. Whatever happens after the nuclear reaction is quite straightforward. But what is the fascinating part and what sets it apart from anything else is obviously what happens inside the reactor. And these graphics here is a pretty good comparison to the other fuel pellets, which is the size of a gummy bear, essentially. It contains a lot more energy just by harnessing all of it. But you get the same amount of energy as compared to three barrels of oil, a ton of coal, or 17,000 cubic feet of natural gas. You get the same amount of energy output based on those inputs, which is really quite astounding.

Per Jander: Slide 10 - Nuclear Energy is Clean

Moving on to the Clean Slide, this is across the lifecycle. Obviously, you have absolutely zero emissions from the nuclear reaction itself and the nuclear power station itself, but this is taking the entire fuel chain from mining, conversion, enrichment, and decommissioning of a power station. It is taking everything into account and the numbers speak for themselves. I mean, you can see that it really stands apart. You have nuclear, wind, and solar on the same level more or less. And then it's just fossil fuels, of course, there's no surprise that they're going to have high emissions. But I think this graphic really drives home the point that in any scenario where you're going to take greenhouse gas emissions seriously, this is the case for nuclear, it's quite clear to me.

Per Jander: Slide 11 - Nuclear Energy is Safe

Finally, let's talk a little bit about safety as well. And when you talk about nuclear energy, clearly what everybody is going to think about is, there's Three Mile Island, there's Chernobyl, there's Fukushima. And these are all of course, very large events that have a big impact on people's lives. But what I think people don't necessarily consider is that in two of them, there were no deaths at all attributed to the nuclear aspect of things. Three Mile Island, the barriers themselves out of the power station actually held up just fine. From a safety perspective, the design worked the way it was supposed to be in the case of a meltdown. There was very little if any radiation released into the environment. In Fukushima, there you had 20,000 people died from the tsunami, there was not a single death from radiation. But what did you think about there was a handful of deaths driven by the evacuation, based on the fear of potential impacts of it. That was moving people from hospitals, old and frail, there was a lot of stress caused. All of those results have not even come out yet. But clearly, there is a definite indication that the fear itself led to more suffering than the radiation it release itself.

Of course, what's left is Chernobyl, and looking at the numbers on the left here, that's when you look at fatality rates or mortality caused by different energy aspects, those numbers on the nuclear side, that's from Chernobyl. But it was from the fire and basically, the firefighters who fought the fire of the exploding reactor, they were the ones that died, and it was a lot less than 100, was maybe around 70 people in total, which is, of course, a lot less than was touted at the time of it. And now when almost 40 years have passed, I think it's quite clear that is nowhere near those numbers that people said initially, was going to happen as death that was going to be caused by this. Again, you compare it to other forms of electricity production technologies, the numbers speak for themselves, I mean, it really is as safe as you can get. Producing electricity is going to be dangerous, mining is going to be dangerous, all sorts of activities are going to be dangerous, but when lining them up next to each other, it's it definitely scores very, very well. 

Ed Coyne: Per, I was going to say, in the last 40 years, we certainly advanced in technology and procedures. And we've learned from all these cases as well of what to do and not do so not even take into account the fact that this has become a very mature marketplace, and what we know today versus what we knew, say 30 or 40 years ago is very different in the way we conduct ourselves and handle these situations. Is that fair to say?

Per Jander: Absolutely, nuclear safety is developed every year, there are lessons learned, there's so much information shared between utilities and nuclear operators around the world. They're great global associations, WANO, World Association of Nuclear Operator for a sample. They are not in the limelight much because people don't really see them but it's completely open books where nuclear power stations share what incidents have happened, what we do to address it, what lessons can be learned from it, it really is quite astounding, there is no competition between different utilities there, it's completely open books and even send teams from various parts of the world to visit others and let them have a look at how things are run at a certain station and open for suggestions how to improve themselves.

And this is by the industry for the industry, then, of course, you have the nuclear regulator whose job is to make sure that safety standards are upheld. And this is all coordinated by IAEA in Vienna, but then you have the association of a bunch of national regulators who all fall on in the umbrella there. It is several levels… I used to work in that field a little bit. And it really is impressive how nuclear operators across the world come together and it continuously improves how they operate and their code of conduct. It's really… you need to be there to see it, but I would encourage anyone who would like to visit a power station to do so and you really get a firsthand look at how seriously they all take the safety in their operations. I wasn't sure about nuclear energy myself what to think about it, but then I decided to join the field to basically find it out when I was at a rotational program at the utility in Sweden, and I was completely blown away by how professional they were, and how open they were about any issues that they may have and how they address them. It definitely built up my confidence and I would surely encourage anyone else to just start looking into it, there's a lot of things available online. But also if you have the opportunity to visit a power station, I would highly encourage anyone to do so.

Per Jander: Slide 12 - New Uranium Bull Market May be Emerging

Ed Coyne: Well, let's shift gears now to the investment standpoint, and what we're seeing in the market today, but also let's address the last couple decades, because this is something we have seen before there have been fits and starts in this market. Can you talk a bit about what we perceive is a potential new bull market that may be emerging or has already emerged within uranium, walk us through this chart a little bit and help the viewers and listeners understand what we're seeing right now in the market today?

Per Jander: Sure, absolutely. I won't spend too much time talking about the '60s and '70s, but obviously, that's when most nuclear power stations were built, the technology started to emerge, and you obviously had a dramatic increase in demand already at that time. Then few accidents, you had the Three Mile Island, you had Chernobyl, that created a little bit of a downturn and a lot of new build projects were paused. And then it was a low for almost 20 years, if you will. And then early 2000s, and not too dissimilar from now there was heightened awareness of potential climate challenges, increases in greenhouse emissions, something needs to be done to this and most people referred to it at the time as the Renaissance for nuclear energy, a lot of new build projects were announced.

And at the same time, you combine this with some incidents at mines, very large mines flooding in Canada, and there were some other natural disasters in Australia that had large supply sources fall out for a while. And adding to that investor interest, it's like, "Oh, there's a good story here". And again, like uranium is going to have a role to play, our nuclear energy is going to have a role to play, so, let's invest in uranium. And these factors combined led to this spike around 2007.

Of course, it didn't last very long because we had a global financial crisis that made just financing too expensive, so, a lot of projects were shelved. You add the Fukushima disaster and led up to a 10-year hiatus, if you will, or a bit of a bear market. Then a few years ago, that' when some large international producers, basically like, "We can't operate our model mines at this cost, certainly not at full capacity".  So, they started idling capacity.  And of course, basically, they fill out contracts in place, they just bought material in the Spot market that indices those contracts. And that's started to tighten the oversupply and basically from 2019 onwards have seen a slow but steady increase in uranium prices. And that certainly has been starting to accelerate now this year as well, as we're going to talk about it here in a little bit.

Per Jander: Slide 13 - Uranium Buying is Accelerating

Ed Coyne: Yes, let's shift to Slide13 because I think this chart really highlights exactly that acceleration that we're seeing in the market today.

Per Jander: Absolutely, utilities have their contracting cycles when they contract with primary suppliers for the delivery windows, there can be three up to 10 years sometimes. And they have their cycles, and obviously, they try to time it well, and they do a very good job at it and when they want to procure uranium and different styles of contracting, if it's going to have doors and ceilings and protections in there. But some utilities come to the Spot market for material as well, it definitely varies by utility to utility. But there is a Spot market for uranium where it's just not for utilities and suppliers, there are traders in there too. And it's a fairly liquid market, I mean, not compared to huge commodities, like oil or gas, obviously, but it's come a long way from the early 2000s.

And definitely, there's supply and demand drives everything. And when you see a good investment case you have people who are interested in investing, and they then put some money into it. And it definitely has been and already in 2007 when investors came in as an early indicator of potential, not necessarily price spike, but an increase in price in a way. And we haven't seen that for about 10, 12 years and now this year, quite dramatic shift where the funds are investing there, obviously there is Yellowcake, there is certainly Spots, as everybody's aware. But even Junior Miners had started buying a little bit as well. And you're starting to see the impact on uranium price as well, it's up 30% in a month's time, essentially. It certainly has a large impact.

Per Jander: Slide 14 - Investor Sentiment is Turning Positive

Ed Coyne: Yes, and on Slide 14, I think we highlighted that nicely, also that the sentiment has continued to turn positive within the space. Talk a bit about that as well. You're in the market pretty much every day, talking to the investors. I think you've mentioned this to me in the past that it's a relatively small universe or small circle of investors and traders at the institutional side. Can you give us some additional color on that sentiment you're seeing and what are you hearing kind of day in and day out in your activity of the marketplace today and the appetite?

Per Jander: Oh, absolutely, there are certainly investors who are both in the physical uranium space as well as the uranium equity space. And I think the physical uranium space is becoming more accessible not only because of Spot of course, but even there are other funds who are opening their own accounts and buying a little bit of uranium to fit on physically. And of course, there are holding costs and other things to consider around it. But if there's a will, there's a way and certainly, some people are interested in it, and otherwise, there's Spot as an option. But clearly, some banks are holding material on behalf of others, they've been starting their own funds, as well. It's definitely spilling over. And I think it's quite unprecedented the interest in physical uranium for the time being.

Per Jander: Slide 15 - Uranium Production/Demand Imbalance Likely to Grow

Ed Coyne: Let's talk about the supply and demand side because like all commodities, it tends to be a supply/demand equation. What's going on in uranium right now on how it is balanced, talk us through that a little bit.

Per Jander: Yes, absolutely. I would say a normal year before these idled mines and then reduced production maybe it is 150 million pounds a year. Now we're looking at about 125, a little bit more than that. There's obviously a pretty significant difference. That gap you see between supply and demand there that tends to be filled by what's called secondary supplies. And that can be government stockpiles. It could be under-feeding from enrichers. And without getting in too many complications there, it's basically an enrichment facility, that can use nonuse capacity to basically free up uranium to sell in the market, it turns into a uranium mine, if you will. And because the enrichment market has been very quiet since Fukushima in general, enrichers have been able to supply quite a bit of uranium to the market.

Now, enrichment prices are going back up and their capacity is committed. That's starting to dwindle pretty fast. Another aspect or another source of secondary supply is commercial inventories as well, they are certainly starting to open up now with this dramatic increase over the last month, you clearly see that their parties have not necessarily been interested in selling before, then now you're hitting new threshold, and they might actually change their behavior a little bit. But the secondary supply is a finite source of the material. With the reduction in production from some of the larger mines, you're obviously going to burn through the secondary supply a lot quicker. And you're going to tighten the supply, and it's going to come from somewhere. The landscape is definitely changing. And we haven't talked too much about the… sorry, go ahead.

Per Jander: Slide 15 - Global Demand for Energy Estimated to Increase

Ed Coyne: I was just saying, clearly demand is spiking. I'm just looking around my office right now at the amount of energy I'm consuming between my laptops and TVs and printers. I'm just one person. And as the population continues to grow, we do a nice job of talking about the demand side of energy over the next couple of decades, that relative to the imbalance, I got to believe that what you said earlier about a bull phase of the market, that certainly percolating, if not directly but certainly into the surface.

Per Jander: Oh, no, absolutely. And I think on a fundamental level, access to electricity is very crucial to the quality of life in general, and the developing world is certainly being electrified right now. But even in the developed side of the world, just like you said, again, humanity is pretty creative, they tend to find things to spend electricity on, whether it's a flat-screen in your bathroom, or you're going to do crypto mining, but maybe not the most crucial thing. But I think a real game-changer is the electrification of the transport sector. So, that we can see a very dramatic increase in the need for electricity. And I think this picture only shows a portion of it, I think it's going to be revised upwards in the years to come. The need for electricity is going to be there and it's only going to grow.

Per Jander: Slide 16 - Global Policy Initiatives Support Nuclear Energy

And then starting to round up here a little bit, obviously, there is a lot of things happening, the decarburization issue is getting real, there is a global momentum that I have not seen before I used to work in policy a little bit for about 15 years ago, there was nowhere near the momentum that you're seeing now, or actual policies are being put in place all across the world. And some of those goals are extremely ambitious. It remains to be seen, obviously, it's going to happen, but something that definitely gives credibility and relief to at least US utilities is the recent news in Illinois, where some reactors were on the verge of being shut down, because legislation couldn't get past to save them. When you see confidence from a national policy level, but it actually translates into concrete action that saves a couple of reactors, it is not just a dream anymore, it's actually starting to happen. I think that builds confidence and I think we're seeing it all across the globe as well that it's more real than it's ever been before. It's quite exciting.

Per Jander: Slide 17 - Decarbonization Goals Align with Nuclear Growth

Ed Coyne: I was just going to say, to your point from a global standpoint, I think this is a great chart because it shows exactly what's happening not just here in the States, but really globally. Talk a bit about this, because I think this is a great piece for people to think about what the next couple of decades are going to look like.

Per Jander: Yes, absolutely, most of the time, you tend to look out the window and see how things change and so you're a little focusing on your immediate surroundings and even though I'm in Europe, in Europe, it wasn't the most fun time to be in nuclear energy, following Fukushima. For sure Germany is exiting, and there's bad news everywhere. But something that's never stopped is China, China has just been basically announced in 2005, "We're going to be serious about nuclear energy". And they have not stopped since. Its new reactors coming out, announcements every year. And they are just moving along. And even Japan obviously, who severely was impacted by Fukushima, while they are now coming around and saying like, "Yes, we're going to get as many reactors as we can back online". And that's obviously a huge sign of confidence from that part of the world.

And even here, on this side of the Atlantic as well, like the national policy in the United States now, bipartisan more or less, like the support for nuclear energy is going to be there, regardless of who's sitting in the White House is a huge boost of confidence. To wrap up, we're going to need all low-carbon technologies regardless of what they are. And in order to get to a net-zero carbon society, it's simply not feasible without nuclear energy. And it's not just the current level, it's going to be a substantial expansion needed for us to be serious about this. If you share this belief, I think in general uranium is a very good investment for the time being. That's it for now, Ed. 

Ed Coyne: Thank you for shedding some light on it and giving us a technical look at the uranium trade, I always like to think that uranium or nuclear in general is really the foundation for net carbon future going forward and simply the backup generator for things like wind and solar. Clearly, I agree, clearly, we're selling our own book so to speak but no question about it, we're going carbon neutral or we're attempting to and nuclear is going to serve a role there. And also, for those that are listening, Per will be available for Q&A, we've got up to 45 questions currently that have come in. He'll be available towards the end of this call to answer any specific questions you might have.

Ed Coyne: Slide 19 - Sprott Physical Uranium Trust Overview

What I'd like to do now is really shift gears a bit and bring on John Ciampaglia. John and I have worked together for over five and a half years now close to six years and he's done a wonderful job, not only in product development or creation, but really helping people understand how these products work, and what they do, and why they do it. But more importantly than that, I want to have John talk a little bit about what the net carbon future might look like, and uranium, it's role in it, and also, more importantly, how our product can help you get exposure to that space. With that, John, thank you for joining us and tell us a little bit about the net carbon future, you know, zero-carbon future, what is that going to look like? And how can we maybe take part in that?

John Ciampaglia: Slide 20 - What is a Net-Zero Carbon Future?

John Ciampaglia: Thanks Ed for the introduction. And thank you to all of our listeners today. We're very excited about this topic today and maybe we're a bit too geeky about this kind of stuff. But we do think it's a very interesting and quickly evolving investment category that is gaining traction around the world. And I think it's happening for a couple of key reasons. One, the growing realization by not just governments, but all of us, as we've seen more and more extreme weather events around the globe, that greenhouse gas emissions need to be reduced and managed. And government policy as Per has mentioned, has really swung hard to address this. And there is growing political pressure to make real change. And these changes take years, if not decades to implement. It's not an overnight solution, but if you don't make these changes, now, we'll have more extreme consequences in the future. This whole idea about net-zero carbon is a growing theme where governments and even individuals are trying to think about how much carbon they produce and how to offset that.

In the case of energy production, which is a huge source of greenhouse gas emissions, the world is clearly trying to figure out how to transition away from intensive greenhouse gas, intensive fossil fuels, and move them to more friendly forms of energy production.

John Ciampaglia: Slide 21 - How Does Uranium, Help Achieve "Net-Zero Carbon"?

And we all know that solar and renewables and hydroelectric are going to receive continued investment in infrastructure build-out, as they're all very greenhouse gas-friendly as we showed you before. The big challenge there is they don't provide reliable baseload energy production. Obviously, at nighttime solar is out when the wind is not blowing turbines are not spending. And I'll just point out a couple of recent examples. I just read an article this week that in the United Kingdom, wind speeds have been lower on average this year and as a result, their energy production from their turbine fleet is down, and they've had to switch to natural gas. Yes, natural gas is a much better cleaning form of energy than say coal or oil, but it is still much, much higher.

Another example, would be closer to home in Texas last February, when they experienced that very severe winter storm, the freezing temperatures that they were not accustomed to completely crippled their electrical network, wind turbines froze natural gas wells froze at a time when demand for electricity absolutely spiked for home heating. It is becoming an important consideration in terms of needs to be claimed as also has to be reliable as the world electrifies. I guess the other thing that I was quite astonished to learn about when we started doing a lot of work in this category was how much of the world is still reliant on coal to produce electricity. And sitting in North America, you will think, "Well, you know, we don't use coal anymore, that's something we use 100 years ago when we were driving around in horses and buggies". Well, surprise, surprise in the United States 19% of all energy production is still from coal, it's astonishing.

If you think about China, its population, and its incredible pushed urbanization, 10 years ago, it was using 70% coal to produce its electricity, it's now down to 57%. And this is really why they're leading the world in terms of the build-out of additional nuclear capabilities, because they want that number from coal to keep going down. These are very important themes that we're hearing from investors. The last theme I would share with you is the theme of ESG. And I was a bit surprised by this, but many investors have said to me, "We've used this as a low carbon way to produce energy and we think it fits within an ESG framework, which I had not really thought about up until about a year ago, given the growing importance of ESG. Why don't we move to the next slide?

John Ciampaglia: Slide 22 - Sprott Physical Uranium Trust

I'll talk a little bit about the Sprott Physical Uranium Trust. It has a long history, not this particular trust, but the predecessor vehicle that we acquired in July. Way back in 2005, there was a company called the Uranium Participation Corp, it traded on the Toronto Stock Exchange, and it was the world's first physical uranium holding company. We acquired that on July 19, 2021 and we reorganize the company into a more traditional Investment Trust. It is a closed-end fund that trades on the Toronto Stock Exchange in U.S. dollars, Canadian dollars. And it does trade OTC on the Pink Sheets, ticker SRUUF.

The fund right now is over a billion dollars in size, it holds over 25 million pounds of uranium. And this is the largest physical uranium fund in the world. It has attracted a lot of investor interest since we made the announcement back in late April that we were doing this conversion, I think investors are attracted to the size of the fund, it obviously attracts a lot of institutional interest. And I think we've also had a lot of experience running different commodity funds with gold, silver, platinum, palladium. And I think a lot of these investors are equally as interested in the uranium we've discovered. Why don't we just move to the next page, please?

John Ciampaglia: Slide 23 - Sprott Physical Uranium Trust: Key Benefits

As I said, it trades on the exchange, it's very liquid, the trading volume on the fund in the last few days has been staggering, as more and more investors are becoming interested in the fund. And we have a unique mechanism to raise new capital in the fund, it is called the At The Market Program (ATM) and this essentially allows a closed down fund to issue new shares when it can do so on an accrual basis to the net asset value. That's a very interesting twist on closed-end funds, which historically have not been able to issue new shares. We've raised about $240 million through this mechanism in the last month. But we have had very good investor interest and I would say the interest we're getting is global and across every investor segment.

One of the key enhancements we made with the trust when we did the reorganization is we're now providing daily reporting of our net asset value and holdings. The investors can see how many pounds of uranium we own, how many we bought that day, what the net asset value per share is and what the premium or discount to net asset value is. And this transparency, I think has been very well received because the prior vehicle only provided this information once per month. And then lastly, the fees, we believe are very competitive, at a 35 basis point management fee and then, of course, operating expenses include the storage of the uranium and whatnot. You might ask where do we store it? We stored at three different facilities one in Canada, one in the United States, and one in France. These are conversion facilities, it is stored in metal drums and it essentially looks like a yellow powder, which is why it also goes by the name of Yellowcake.

John Ciampaglia: Slide 24 - The Trust Holds "Yellowcake" Uranium 

Why don't we go to the next slide? Speaking of Yellowcake, there it is on the slide. I'm not going to get into the cycle of this, because it's probably more prepared. But essentially what we hold, as I said, is this yellow powder and drums that begin its journey through the conversion process and then end up being turned into nuclear fuel pellets for reactors.

John Ciampaglia: Slide 25 - How Much Uranium Does the Trust Hold?

Let's move to the next slide, please. So, how much does the fund hold? Right now, we own a little over 25 million pounds of the stuff, which is I still shake my head and how much that is. And just to give you some sense of what is the equivalent energy that we can produce, if we converted it all into pellets. If you think about a country like France, that has one of the highest percentages of electricity produced by nuclear, and that's 70%, that's enough uranium to run all of their power plants for about one year's time. So, it does sound like a mind-boggling amount of material, but as Per said earlier, the industry goes through well over 150 million pounds of uranium a year, just to keep all of those plants operating. So, it is a very important commodity and it's obviously a commodity that can't be substituted or thrifted like sometimes happens with other commodities. So, it is a very important commodity and it represents a very small part of the overall cost of operating a nuclear fuel reactor facility.

Ed Coyne: Slides 25-End

Ed Coyne: Well, thank you, John, and like Per, John, you're going to be available for this to answer some questions. With that, what I'd like to do now is turn it over to Natalie, to read her part before we go into the Q&A, and I've got some valuable questions that I want to read off, that came in at the time of signing up for the webcast, as well as questions that have been coming in during the webcast. So, I'll turn it back to you Natalie first, and then we'll go into the Q&A.

Q&A Section

Natalie: Great. And thank you all for such an informative presentation. Just as a reminder, additional material can be found in the Documents folder at the bottom of your screen. We appreciate your feedback, please take a moment to fill out our brief survey also located at the bottom of your screen. Our speakers will be taking advisor questions, please type your questions in the box to the right of the slides and we'll get to as many of your questions as possible. In the event your question is not answered on today's event, a member of the Sprott Asset Management Team will reach out to you directly. And if you'd like to have a conversation to further discuss the ideas that were covered during today's event, please click the one-on-one folder at the bottom of your screen and confirm the request. And with that, I'll turn it back over to Ed for our first question.

Ed Coyne: Thank you, Natalie. And what I'll do just for ease of our listeners is, I'll direct who this question should go to just for clarity. But, Per, I think we'll start with you because it's the first question, I think really speaks to what the markets have been doing, particularly in the last month or so. And the question is this, "Can you please add some color on the depth of the Spot market in uranium before and after Sprott entered the market" And part two of that question is, "Where have those pounds come from in which we've purchased uranium for Sprott?"

Per Jander: Yes, thanks, Ed. In the last month, absolutely, things certainly have changed. I mean, we bought in about 6 million pounds. While these volumes are not unprecedented, it certainly has had an impact on available supply in the Spot market. And I think the recent increase in Spot price is a clear indication of that. So, a game-changer certainly is the DTM function that it's not as chunky when the funds goes in and buy them around, try to buy 2 million pounds at once, and need to lock up a fixed price while they try to go out and find investors for it, if more allows us to have a little bit of a consistent presence in the market, if you will. And we'll still finding material, it's not a problem that we'd have to look a little harder, absolutely, but it's still possible to find, but it's not as awash. So, surely the market is tightening and the price is a clear indication of that. I think.

As far as the sources where we find it, won't comment on it specifically other than it's been a pretty standard mix of what you expect to find as far as what the commercial inventory is with traders, suppliers, as well. So, it's pretty expected what we have seen it so far and of course, now we're getting into new price levels, some sellers might not be there anymore, and others may emerge. But definitely, it's a changing landscape, no doubt.

Ed Coyne: Thank you, Per. And, John, this is probably a good one for you, I'm sure you've been getting bombarded with this question as well, whether it's from a sales standpoint, or an operations standpoint, but I know, everyone on our sales desk has certainly gotten this question. And that is, currently, you can't buy it through the New York Stock Exchange and the number one question we seem to get is when is the US ticker coming out? And then I guess part two of that question is, what do you think in your opinion will happen when there's no Spot available to buy it? And maybe Per can address that part? But let's go with the US ticker first, what are our thoughts on that? What are we thinking about that? What's the reality of that potentially happening down the road?

John Ciampaglia: Sure. Okay, a great question we get asked all the time. And when we made our proposal to the UPC board, many months ago, one of the items of consideration that we put forward was a pledge to pursue a US listing. All of our trusts today, with the exception of the Uranium Trust are duly listed on New York and Toronto. And we would absolutely love to tap into that market. Now, what's the process to do that we have to go through a regulatory review process with the SEC, obviously and we really don't know how long that will take or what we're going to encounter through the process because our knowledge is nobody has taken a filing for uranium stockpiling fund to final completion through the SEC process. So, we believe we'll be the first and given will be the first it'll be a novel process. And given the education that we think we're going to have to go through with the SEC to make sure that they're comfortable on how the trust works and make sure that we have a very good robust disclosure for investors, that will take time. So, we're not giving anybody an estimate, but it's something that we will be starting the process in the next few weeks. And we hope to have some outcome determined in the first half of next year.

On the second part of the Spot material, one of the things that is very challenging about the uranium market, as we've gotten more and more involved is, it is not the most transparent market in terms of how it operates. It's still an OTC market. And I think a lot of market participants have complained that it's not the most transparent and price discovery is lacking. And I think one of the things that a lot of investors are expecting from the trust, is it playing a greater role in that price discovery process by essentially being more active participant in the Spot market. And that's exactly what the Trust has done so far, over the last four weeks or so, we've been buying uranium and interestingly, I just did a quick calculation that we've bought uranium in 18 of the last 20 trading day.

We've been active there and that's part of the price discovery process is having transactions, real transactions occur, so that all participants can see exactly where people are willing to make a market. And the reality is that there is a price for each party where they will let go of their material to another party. And we don't know what that is, we don't speculate on the price of uranium, we just stockpile it, if investors give us capital, we don't make a market timing call, we just put it to work. And that's really the purpose of the vehicle, it's to stack uranium, it's not a trading company, it will not make some grand call that the price of uranium is now x and we should sell it off. No, that's not the purpose of the Trust, the purpose of the Trust is to operate in perpetuity, and to basically provide greater scale and greater liquidity over time to investors.

Ed Coyne: Thank you, John. And this may go back to Per, because this sort of dovetails what you just mentioned about price discovery. Per, from a utility standpoint, the question is this, when do you believe utilities will start long-term contracting and at what price per pound and US dollars? And the second part of that question would be, how much more new annual production could be brought back online at anywhere from $50, $60, $70, or even $80 a pound? And where would those amounts come from? let's start with the first one, when do you believe utilities will start doing long-term contracting and at what price would you expect to see that happen?

Per Jander: I would say utilities haven't been sitting on their hands, they are active, they are in constant discussions with suppliers. Of course, they can ebb and flow but there's by no means that utilities just sit on their hands for a few years at a time.  I've seen things in social media, it's like oh utilities are getting squeezed by the uranium market, I think people need to give utility buyers a little bit more credit than that they know exactly what they're doing, sure you can time the market right or wrong but they worked with a much longer time horizon. I'm not worried that any utility is going to run out of material to run the reactors, but of course, the COVID situation has caused people to work from home and that might have pushed out some of the procurement processes a little bit because obviously, you tend to meet in person when you have these bilateral discussions with suppliers and also some utilities might have financial difficulties when the customers can pay their bills essentially and on both on industrial and private individual levels.

They can be a range of factors in having made utilities change their buying activities a little bit. I don't know if any utilities is scared into action by this either, so far the prices obviously is spiking up a bit but until it is sustained, I think utilities, have a little bit of inventory, so, they're probably just sitting and watching this a little bit and see what's actually going to happen. And that sort of dovetails a little bit into the second part of the questions in when do suppliers start turning their mines back on and it's very much the same. And I've been listening to chemicals, investor calls as well and they do a very good job in communicating that a spike in the Spot price is not going to cost them to turn the MacArthur River back on, they need to have a sustained price they need to see contract prices reflect the new level that motivates having their mine on. Absolutely, it's exciting to see what the uranium price is doing in such short time but until we're seeing a sustained level of sustained interest, then that's when you will start seeing behavior change from the longer-term actors in this market. But it certainly is an exciting time absolutely, but it's more of a wait-and-see at this point and see if this really has legs. And personally, I think it does, but it's still the next month or so will show.

Ed Coyne: Thank you. And I think we have time for one or two more questions, we're getting close to the top of the hour. I'll shift gears back to John, for one, and then we'll come back to you Per, for one more, which I think is a pretty good question here, which I'll address. But this is one we've spent obviously this last hour talking about the physical side of the market, the uranium itself. But one of the questions that came in which maybe it's premature to think about this, but what about the miners? If you think about Sprott, as a firm, we have physical trust that gives you exposure to physical metal, we have mutual funds that give you exposure and ETFs give you exposure to the miners themselves. What about specifically miners within the uranium market in general? Is that market large enough to even think about? John, maybe you could give us a little bit of color on that, what is the appetite there? Are we seeing anything? Are you getting questions about that currently today?

John Ciampaglia: Sure. Well, I think it's fair to say that with the pop that we've seen in the price of the commodity, the uranium miners and developers have had a much more significant increase what you would expect that would give them the operating leverage of a mining company. The uranium equities have had dramatic gains over the last 12 months. And clearly, these equities are reflecting a much higher Spot price of uranium and where we are right now, which is around 44 dollars a pound. I think investors need to keep that in mind that these stocks have valuations right now that do reflect a much higher price. I think the second thing is that for an existing producer, you have to think also about how much of their production has been already sold at lower prices. You may not get the gain that you think in terms of higher prices in terms of their revenue and bottom line.

And then for more of the junior companies, exploration development companies that are pre-production, those companies are obviously rallying on the back of the expectation that this higher uranium price increases the probability that they will one day become an operating mine. And that sometimes happens, and sometimes it does not. These are all different considerations that people need to think about equity risks, because at the end of the day, even commodity companies have a certain level of equity risk inherent in them. There are operating risks, there's geopolitical risk, versus the Spot commodity price, which tends to be less volatile than the valuations of the equities themselves.

Ed Coyne: Thank you for that. I like to always tell investors when we talk about the equities versus physical, particularly if you're new to this allocation, start with the physical first, get comfortable with the trade, get comfortable with the environment, think about that first. And then as that comfort level increases, you can think about the equities more as an opportunistic type of allocation. I think you brought up some good points there. But John, thank you for that, and Per, let's go back to you for one. I know, we have a slide that talks about this as well, I think we touched on it briefly, but I'm looking at the questions coming in which we have 76 questions right now, but this question is probably one of the more common ones, which is, can you walk us through the overall life cycle.

The question is, please walk us through the typical life of uranium from mining to refining, all the way to usage and disposal. I mean, we could probably do an entire call on that itself. But if you could spend a few minutes walking an investor through that cycle, and I believe it's on page 24 of the slide deck, we can look at that, but if you could walk them through the cycle, and what that looks like, I think that'd be useful. And then any other questions we did not get to today, we'll certainly be reaching out to you via email and via phone calls in the coming days. Pre, walk us through the cycle, and we'll wrap it up with that.

Per Jander: Alright, thank you very much. I think people can see the slide here and then I apologize in advance to any Canadian listeners for not showing the Canu technology, which is a great technology, but this focus is on light water reactors, which is mostly used around the world. Obviously, it starts with exploration, you got to find the uranium somewhere you get it out of the ground and you mill it. You basically crush the ore, or you can leech it out, depending on what type of mine it is. And then you get the shape of the U2O8which is the initial stage of the front end of the fuel cycle. There is a step that is called refining, where you just purified it a little bit before you send it into conversion to UF6 and this is where it goes from a powder form into a gas form. And the reason you turn it into a gas is for the next step called enrichment, where… this is probably what people might be familiar with, but it's obviously the uranium isotope, U-235, which is the interesting one from an efficiency perspective, the majority of naturally occurring uranium is uranium-238.

In order for it to be able to use in a light water reactor, you need to enrich it, which means increase the portion of the 235 isotopes to about 3% to 5% and that happens in the enrichment phase. After that, you deconvert it if you will turn it back into uranium oxide. And so that's the UO2 to form that, that's what is used to press into a pellet, then it is put into fuel elements. Then you burn it into the reactor, and then the countries can go different ways on this but for most countries do a once-through, which means that you use it once in the reactor, and then you store it, it is called spent fuel and you put it in storage. Or there is another alternative when you reprocess it, which is used in France and other countries, in England and Russia for sure, where you basically make new fuel out of the used of fuel. Now, it's a pretty expensive and quite difficult process because of the radioactivity involved.

But certainly, some countries have chosen to do… the United States and does, for example, obviously, they have a military aspect of things for where that's done, but it's not on the civil side of things. That's the essential fuel cycle on your slide and we can spend a lot of time on this, I'll be more than happy to do another call on it. But the decision the Spot has now made is to keep it in the most liquid form and that is the U-308, the liquid is traded because the further up the chain you move, the more specialized and the less liquid the product is going to be. It's the initial stage there's no radioactivity involved other them basically the minor radon issues, but it's not really radioactive until you have put it into the reactor. It's fairly harmless, it's stored at these facilities around the world that John mentioned earlier. Yes, Yellowcake U-308 that's what the focus is and it's by far the most liquid form that's trading.

Ed Coyne: Thank you for that. And thank you all today for joining us for the last hour plus on uranium. We look forward to having further conversations within your group, everyone on this call, can certainly download the presentation deck. And for those that want to share it with others, we will be distributing a recorded version of this in the coming days and we encourage you to reach out to us we would love to have further conversations with you whether it's regarding uranium or other unique physical Trust or equities that we offer within the precious metals real asset space. Thanks again for your time and interest today and we hope to be speaking with all of you down the road. Thank you!

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