2009 Year End Letter To Shareholders
2009 Year End Letter To Shareholders
CEO’s 2009 Year End Letter To Shareholders
December 28, 2009
Dear Shareholder,
With 2009 nearing completion, I want to thank you for your continuing support as a shareholder. We value your confidence in management. 2009 was a stellar year for the Company in all regards, and expectations for 2010 are truly exciting. Management is squarely focused on initial in-situ recovery (ISR) of uranium and the start of production cash flow.
As you will recall, the first three months of 2009 appeared very threatening with stock markets bottoming in March amid tremendous financial uncertainty both domestically and globally. Throughout that period, UEC was achieving milestones that were expanded on through the full year.
Before we get into the events of the year, I would like to assure you that UEC is well funded to aggressively pursue its production targets in 2010. The Company has approximately $21 million on hand, and an agreement to receive an additional $11 million early in 2010 from the sale of a non-core asset in New Mexico.
Achievements in 2009
- Financing – The Company completed a $22.3 million equity financing in June.
- New and larger game plan in Texas – Last week the Company completed the acquisition of South Texas Mining Venture LLP (STMV) from Uranium One and Everest Exploration. This transaction expands our vision for long-term production of uranium in South Texas. Assets acquired include the fully licensed and permitted Hobson ISR Processing Plant, the advanced Palangana Uranium Project and a portfolio of exploration-stage properties that are all accessible to the Hobson facility.
Hobson has a licensed capacity to process one-million pounds of U3O8 annually, and management believes that the capacity can easily be doubled with the installation of a second and larger vacuum dryer. Hobson is centrally located in Karnes County, an easy drive from all of the Company’s projects and properties.
The Company’s objective in South Texas is to initiate and then to expand production for many years, operating from a strong base of advanced, development and exploration-stage ISR projects that surround the centralized Hobson processing facility.
- Now, two advanced ISR projects – As part of the STMV acquisition, the Company now controls the prior-producing Palangana ISR project in South Texas. Palangana is a near-term production project and very close to the completion of all permitting, like the Company’s Goliad Project nearby. Already, UEC geological staff are on the ground assessing more than 4,000 holes drilled there historically, together with the prior owner’s plans for production at Palangana.
- Permitting advances – With the addition of the Palangana ISR Project, UEC now controls two projects that are very close to receiving Operating Licenses. At Palangana the draft Radioactive Material License (RML) is in the final stage of completion. At the Company’s Goliad Project, only the RML, aquifer exemption, and one remaining hearing are pending.
- Increase in uranium resources – In 2009, the Company announced an NI 43-101 qualified resource of 1.3 million pounds U3O8 at its Nichols Project in Karnes County in South Texas. This is in addition to the Company’s resource at the nearby Goliad Project, consisting of 6.9 million pounds of U3O8 in all categories of resource under NI 43-101standards. Importantly, early in 2010, the Company plans to confirm and upgrade the mineralization at Palangana based partly on the substantial drilling and other exploration performed by its prior owners.¹
- Analyst coverage – Three new analysts – with CIBC World Markets, Rodman & Renshaw and Versant Partners - initiated coverage of UEC in 2009. Six analysts now track the developments of the Company. In addition, in June, UEC was added to both the Russell 2000 and Russell 3000 Indexes, based on market capitalization relative to all other US public companies.
- New joint venture – Uran Limited, an Australian uranium explorer, can earn 65% of the Company’s Grants Ridge Project in New Mexico by completing a feasibility study on this prospective area with several prior-producing mines. Uran has started exploration drilling at Grants Ridge, and is targeting a defined and qualified mineralized area for the project in 2010. The Company’s portfolio of properties holds plenty of exciting potential -- another 18 projects in New Mexico, Wyoming, Utah, Colorado and Arizona, all with prior exploration by majors.
- Sale of interest in Cebolleta in New Mexico pending – In November, the Company announced an option agreement to sell its 49% interest in the Cebolleta Project in New Mexico to Neutron Energy for $11 million. This sale, if consummated, is anticipated to close early in the new year, and will bring valuable funds for the further expansion and consolidation of the Company’s production initiative in South Texas.
2010: Initial Production and Cash Flow Targeted
The Company’s key objective is to achieve initial in-situ uranium production in 2010. With the fully licensed Hobson processing facility now in hand, and with progress each week on remaining permitting issues, management is prepared to transition to an operating company and has the technical experience at all levels to carry through to successful operations. As you are probably aware, the technical team here has been involved with 35 ISR projects in the U.S., many of which are still in production.
Initial production is just the start of the Company’s plans for production in South Texas where we see an opportunity that is truly Texas-sized. The South Texas Uranium Belt is one of the country’s largest producing areas, and still holds significant known resources that are amenable to low-cost in-situ recovery. Also, Texas has a unique streamlined permitting framework for uranium mining.
Concurrently, with the closing of the acquisition of Hobson and Palangana, UEC has also acquired a portfolio of exploration properties, all with known mineralization and all accessible to the Hobson plant for processing. The plan here is to build a strong pipeline of ISR projects at all stages of development and to increase production in South Texas for many years.
Expansion of Nuclear Power in U. S.
You’ve likely seen several statements from U.S. President Obama, or Energy Secretary Steven Chu, demonstrating their support for nuclear power and the need to increase electrical power generation using nuclear energy. Following up on these urgings, a bipartisan bill was introduced in the U.S. Senate in mid- November, co-sponsored by Republican Lamar Alexander of Tennessee and Democrat Jim Webb of Virginia, which is a $20-billion plan to double the country’s nuclear generating capacity in 20 years, including $100 billion in federal loan guarantees for the next generation of nuclear plants. “The Clean Energy Act of 2009” is designed to “invigorate the economy, create jobs and move the United States toward providing clean carbon-free sources of energy.”
The Price of Uranium
Over the past year the spot price of uranium has fluctuated between $40 and $50/lb, and a multiyear support base has been established in the $40 - $41/lb range. Throughout the industry, demand is anticipated to far exceed supply on both a global, as well as a local-U.S. basis for the foreseeable years ahead. The longterm contract price is stable at $62/lb according to Ux Consulting (www.uxc.com). While this is certainly a workable level, the Company’s focus is to control our own future by producing at a very low cost using in-situ recovery methods.
The entire UEC team is working diligently to make the Company one of the few, new uranium producers in the world. We have the momentum to make 2010 the best year yet, and we welcome your participation in this robust growth. Please do give us a call at 1-866-748-1030, visit www.uraniumenergy.com or email [email protected]. Thank you for your confidence in the Company.
Yours sincerely,
Amir Adnani
President and CEO
Uranium Energy Corp
¹ Estimates for measured, indicated and inferred mineral resources have been determined in accordance with the definitional standards on mineral resources of the Canadian Institute of Mining, Metallurgy and Petroleum referred to in Canadian National Instrument 43-101 (NI 43-101). Measured, indicated and inferred mineral resources, while recognized and required by Canadian regulations, are not defined terms under Industry Guide 7 of the U.S Securities and Exchange Commission (the “SEC”) and are normally not permitted to be used in reports and registration statements filed with the SEC.