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Uranium Prices

Nuclear utilities purchase uranium primarily through long-term contracts. These contracts usually provide for deliveries to begin two to four years after they are signed and provide for delivery from four to ten years thereafter. In awarding medium and long-term contracts, electric utilities consider the producer's uranium reserves, record of performance and production cost profile, in addition to the commercial terms offered. Prices are established by a number of methods, including base prices adjusted by inflation indices, reference prices (generally spot price indicators, but also long-term reference prices) and annual price negotiations. Contracts may also contain annual volume flexibility, floor prices, ceiling prices and other negotiated provisions. Under these contracts, the actual price mechanisms are usually confidential.

The long-term demand that actually enters the market is affected in a large part by utilities' uncovered requirements. UxC estimates, in the Q1 Outlook, that uncovered demand is only 4.1 million pounds U3O8 or 2.2% of projected demand in 2017. Uncovered demand, however, is projected by UxC to increase significantly over the period of 2018 to 2020, such that up to 54.9 million pounds remains uncovered for 2020, representing 29% of projected demand in that year. Annual uncovered demand rises rapidly for years after 2020, to 150 million pounds U3O8 in 2025 and over 179 million pounds U3O8 by 2030 (representing roughly 80% of total base case demand). At 179 million pounds, uncovered demand in 2030 is over 16 million pounds U3O8 more than total production expected from the year. In order to address the rising portion of demand that is uncovered, utilities will have to return to the market and enter into long-term contracts. From 2006 to 2010, on average, 39 million pounds U3O8 equivalent were purchased on the spot market per year and roughly 200 million pounds U3O8 equivalent were contracted in the long term market each year. In 2016, by comparison, 46 million pounds U3O8 equivalent were purchased on the spot market, and approximately 66 million pounds U3O8 equivalent were contracted in the long term market. With low contract volumes in recent years and increasing uncovered requirements, we expect that long term contracting activity will have to increase in the near future as utilities look to secure supply and move U3O8 through the nuclear fuel cycle in order to fuel the world's growing fleet of nuclear reactors.

The long-term price is published on a monthly basis and began the year at $44.00 per pound U3O8. On low volumes, as noted above, the long-term price declined to $30.00 per pound U3O8 by the end of the year.

Electric utilities procure their remaining uranium requirements through spot and near-term purchases from uranium producers, traders and other suppliers. Historically, spot prices are more volatile than long-term prices. The spot price began the year at $34.25 per pound U3O8and ended the year at $20.25 per pound U3O8. In the early part of 2017, the uranium price has gained some momentum, trading in the $25.00 per pound U3O8 range, and was last quoted at $25.50 per pound U3O8 on March 20, 2017.  
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