As you may know Azincourt Energy, in addition to its lithium exploration projects, has two advanced uranium exploration projects in the prolific Athabasca Basin, Saskatchewan, (as well as an early stage exploration project in the Picotani volcanic field, Puno, Peru). As some of you might know, the Athabasca Basin is one of the world’s most prolific regions of uranium production.  It is best known as the world's leading source of high-grade uranium and currently supplies about 20% of the world's uranium.

It is important that we take a moment and understand where the uranium sector is today.  We are currently witnessing a dramatic ongoing uranium supply disruption.  Apart from precious metals, all commodity bull cycles are largely dependent on one simple material phenomenon, “supply disruption”, and nothing at the moment says more to supply disruption in any commodity than the nuclear fuel metal itself, uranium.

Let’s dive into this a bit more and have a look at the facts.

Rule number one for any supply disruption: Have producers drastically cut production? The answer is a most resounding “yes”.

Kazatomprom, the world’s largest uranium producer, started this process by cutting output by 10 percent in early 2017. This was followed by uranium giant Cameco suspending Athabasca-based McArthur River, the world’s largest uranium mine, in late 2017, bringing 10% of the global production off the market. Paladin cancelled a planned expansion and announced it will mothball it’s Langer Heinrich mine in Namibia. Then Kazatomprom followed with two additional production cuts bigger than the first, with its continuing value over volume strategy.

Rule number two for a supply disruption: Has market demand for uranium been rising? Again, the answer is “yes”.

For starters, primary producers such as Cameco are buying large volumes in the spot market to fulfil their contracts and delivery obligations to utilities i.e. producers of nuclear power. Secondly, long term strategic investors such as the London-based Yellowcake Fund is buying at least 8M lbs. of yellow cake, 5% of the global production, annually and other big funds are being established to hold yellow cake as well.

All this in the current backdrop of the world-wide nuclear industry. For instance, according to Raymond James, global nuclear industry consumption is to increase in 2019 with a probable supply gap emerging in 2022-2023. Furthermore, there are globally 55 nuclear reactors currently under construction, with China and India leading the charge, which will need a steady supply of the nuclear fuel metal as well.

To that effect, supply is contracting and at the same time demand is rising in one of the most illiquid and inefficient commodity markets in the world. (Because of its national security implications and its single industrial purpose to be used as nuclear fuel to generate electricity, uranium is one of the least traded commodities on the face of the planet.)

Recent Uranium Spot Price

In fact, spot uranium has climbed by 30% in the last six months alone. If we were to apply that price appreciation to spot gold prices for the past six months, then gold would be trading at $1718 an ounce right now.  You think the gold bulls would be stampeding the streets if gold were trading at that level?

Historical Uranium Price

Producers and explorers can see massive market cap uplift in bull markets.  There were some epic buyouts in the well documented uranium bull of 2007.  In 2011, a mini-bull in comparison, evaluations skyrocketed.  No wonder uranium bull markets are a favourite of legendary investors.

It is for these reasons we believe Azincourt Energy is exposed in the right commodity, in the right location, and potentially, at precisely the right time.  There is a creeping tide of positive outlook articles and recommendations out there. Just spend a few minutes on Google and you’ll get plenty of hits.

We are committed to the lithium side of our business, as we are believers in the long-term trends that support this sector.  While the market adjusts to macro factors in the lithium space, investors and shareholders of Azincourt should be aware that we are moving our uranium assets forward at the same time.  We will be more aggressive with this plan in the coming months.

Please visit our website to learn more about our East Preston and Patterson Lake North JV projects, and our 100% controlled Peruvian projects.  As many of you know, I welcome communications, comments and contact from our shareholders and various stakeholders, I am always available.

Sincerely,

Alex Klenman, President & CEO