Sustainable Development of U Production:

Time ChallengeAlexander V. Boytsov

Deputy Director General,

ARMZ Uranium Holding

Moscow, 2010

1

88 % growth of operating NPPs worldwide.

119% growth of total installed nuclear

capacity.

Most active nuclear industry development -

in China and India.

2,5-fold grow of installed NPP’s capacity in

Russia.

World atomic energy development

NPP’s construction, pcs.

NPP’s installed capacity, GWe

Today

In a 20 years:

Source: WNA

436 operating Nuclear Power Reactorswith a installed capacity of 372 GWe.

Most of operating NPPs are located in theUSA (104), France (59), Japan (53) andRussia (31).

49 new reactors with a combined installedcapacity of 44.35 GWe are underconstruction in 13 countries.

Uranium demand and atomic energy growth

The main factors of demand/supply relationship

Reactor related

uranium demandAdditional demand

Secondary sourcesUranium mining

• Countries’ policy in atomic energy

• Trends in new NPPs construction

• NPP’s operation time extension

• NPPs decommissioning

• HEU-LEU Program

• US policy in the uranium inventory reduction and stock balance selling

• Policy in spent fuel and HEU recycling

• Favorable uranium prices

• Sufficient and qualitative uranium resources

• Sufficient uranium production capacities

• Staffing

• Uranium as a trading commodity (stocks trading)

• Energy companies stockpiles

Key issue of the atomic energy development –

sustainable and long-term uranium supply

SUPPLY

DEMAND

Projected U requirements to 2030

WNA 2009 Nuclear Fuel Market Report:

Reactors requirements growth from 68,000 to 104,000 tU to 2030 (53%)

Uranium production needs to increase from 50,000 to 99,000 tU

Is it possible for U industry to double uranium production within 20 years?

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2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Добыча урана Вторичные источники

Общие потребности

WNA,2009, средний сценарийДополнительный спрос (складские запасы АЭС, закупки инвестиционныхи хеджевых фондов)—порядка 5% от реакторных потребностей

tU

WNA 2009, reference scenarioAdditional demand (inventories, investors, hedge funds) – 5% of plant requirements

U production Secondary sources

Total U requirements

Historical uranium production vs NPPs demand

The last 20 years – uranium production covered about 40% of uranium demand.

The difference was covered by inventories and secondary sources.

Low uranium prices din not stimulate uranium production production

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U, t

on

s

Accumulation

of U

inventories

Uranium production

NPPs U requirements

68 ths tU

50 ths tU

Consumption

of inventories

Since 1945 Ths. tU

Produced 2 468

Consumed 1 919

Stockpiled 549

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цена спот

цена по долгосрочным контрактам

USD per pound of U3O8

spot price

long-term price

9135

8001

64275477

4624

29802340

1346 1210 1140

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World’s largest U mines in 2009

World uranium production at a glance

Facility Main owner U

production, t

% of the

world total

McArthur River Cameco 7340 15

Ranger Rio Tinto 4423 9

Rossing Rio Tinto 3574 7

KATCO AREVA 3250 6

Priargunsky ARMZ 3003 6

Olympic Dam BHP Billiton 2981 6

Arlit AREVA 1808 4

Rabbit-Lake Cameco 1447 3

McClean Lake AREVA 1388 3

Akouta AREVA 1435 3

Uranium prices increased in 2007 led to a growth of uranium production.

Russia/ARMZ - world’s 5th by country/company in uranium production

Countries – leaders of U production in 2009, tU

World uranium production in 2004-2009, tU

Companies – leaders of U production in 2009, tU

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Почие

США

Узбекистан

Нигер

Россия

Намибия

Казахстан

Австралия

Канада

39357 41102

43648

50305

Factors affected on U production plans

Main risks hampered development of

biggest U mining projects

Uranium production is behind the declared plans. Reasons:

o Speculative announcements of some companies, especially juniors

o Financial crisis

o Price volatility

o Technical limitations

o Political, social and environmental factors

Resources

U production

Technical risks

Political,ecologicaland social risks

Financial risks

Geological andmining risks

Deposit Financial risks Technical risks

Politicalsocial and

environmentalrisks

Olympic Dam(expansion), V V

Dominion V

Сigar Lake V V

Imouraren V

Midwest V

Jabiluka V

Elkon V

Uranium production capabilities to 2030

8WNA,2009, reference

Stages of the uranium industry development 2010- 2020 - reactor demand covered by uranium production after 2020 - uranium production shortage after 2025 – decrease of uranium production and production capacity shortage

(decommissioning of some mines due to U resources depletion)

Uncovered demand -

«window of opportunities»

tU

production

Uranium production forecast for leading companies

(ARMZ evaluation)

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Ranger Rossing Rossing-Expansion

Resources398 ths.t

Resources270 ths.t

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20,0

2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

Christensen Ranch

Imouraren

Arlit

Akouta

Tortkuduk

Muyunkum Exp.

Muyunkum

Ryst Kuil

Trekkopje

Bakouma

Kiggavik/Sisson

Millennium

Midwest

McClean Lake

Cigar Lake

Mc Arthur River

Resources543 ths.t

Resources209 ths.t

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Kintyre

US ISL Exp.

Smith Ranch -HighlandCrow Butte

Inkai Exp.

Inkai

Millennium

Rabbit Lake

Cigar Lake

MacArthur River

Resources455 ths.t

Resources-178 ths.t

ths. tUCameco Rio-Tinto

AREVA

After 2024 – sharp drop in uranium production due to thedepletion of U resource base at McArthur River and Cigar Lake.Possible deficit of uranium resources. Residual U resources - 39%of initial.

2027 - production shut down, residual U resources - in Jabilukadeposit (non-developed due to social and political limitations)

Production decrease since 2023 (abandoned McArthur, Sigar Lake ,Akouta, Trekkoppje). Residual U resources – 38% of initial.

Even subject to realization of all plans for development of new mines and expanding existing facilities, after 2025 uranium production will decrease and will cause the overall decline of uranium production.

ths. tU

ths. tU

1679

950

566 545 481 435367

279 276196

689

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U resources is a key factor for sustainable development

of uranium production

leading companies will produce about 1.8 million tons of uranium in 2009-2030 (U resource consumption - 37%)

62% of the total companies’ U resources will be concentrated in the Olympic Dam deposit by 2030 (copper-main commodity)

U resources of primary uranium mines will be reduced by 2030 more than twofold

Uranium resources by leading companies, th.tU Uranium resources by countries, th.tU

Total U resources –

4925 th.t (in-situ)

World recoverable U

resources - 6463 th.t

(IAEA/OECD-2009)

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2009 2030

Paladin Energy

Uranium One

Cameco

Rio Tinto

Казатомпром

Areva

АРМЗ

BHP Billiton

Exhausting of U resources base by leading companies

as a result of its production, th.tU

Kazatomprom

ARMZ

The cost categories of U resources,

involved in production

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< 80 $ / kg

80 – 130 $/kg

> 130 $/kg

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Variation of uranium resources structure on cost categories in 2008-2030

2008 2030

12%

49%

39%52%

48%

Significant reduction of large mines with the cost categories of resources <USD 80/kg U

By 2030 large deposits (McArthur River, Cigar Lake, Rossing, Ranger, Akouta, Akdala, Inkai, Millenium, Karamurun, etc.) will be depleted

Deposits with the resources cost >USD130$/kg U will come into production

Main objectives of the world uranium mining industry

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Development of uranium project from discovery to production takes about 15-20 years

Main conditions for sustainable uranium mining industry development during the next 5 years:

Intensify uranium exploration aimed at discovery of new large- andmedium size uranium depositsRevaluate current resources and develop stand by deposits for miningImplement innovative environmentally harmless technologiesResolve staffing issues

Discovery Exploration

and Scoping Study

Feasibility study

Engineering and construction

ProductionPreliminary Feasibility

Study

2010 2020 2030

Realization of uranium mining plans should be associated with stable, adequate and transparent uranium market prices

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ARMZ: 2009 key results

Uranium production in 2007-2009

ARMZ – one of the world leaders in U production

Production Growth Rate In 2009

ARMZ – World’s third by U production

growth rate

ARMZ – World’s 5th by uranium

production

tU

2009 : ARMZ produced 4624 tU - 5% more than in2008 Uranium production in Kazakhstan - 6,4 foldincrease (from 166 tU in 2008 to 1063 tU in 2009)World’s third by uranium production growthrate. World’s 2nd by uranium resources (after BHPBilliton)U resources growth at above 100,000 tU as aresult of exploration and M&A activities

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Karatau

Akbastau

Zarechnoe

Khiagda

Dalur

PPGHO

tU

%

Priargunsky

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12

Planned facilities

6. Elkon

7. Gornoe

8. Olovskaya

Operational and under construction facilities

1. Priargunsky

2. Khiagda

3. Dalur

4. Akbastau

5. Zarechnoe

Exploration ventures and Prospective projects

9. Mongolia 10. Namibia

11. Armenia

ARMZ- U1 alliance

ARMZ 2009 Global Presence

ARMZ strategic objectives

Development of uranium production at existing and under

construction mines

Development of new uranium mines in Russia (Yakutia,

Transbaikalia)

Development of uranium production in Kazakhstan

Diversification of the uranium resources through the access to low-cost U resources worldwide

Diversification of commodities (NPP materials, gold, etc.)

The main goal - to meet demand of Russian nuclear industry in uranium and to take a leading position on the global uranium market

Thank you!