Uranium Resources, Inc.

The Uranium Market

The only significant commercial use for uranium is as a fuel for nuclear power plants for the generation of electricity. According to the World Nuclear Association (‘‘WNA’’), as of November 2015, there were 397 nuclear power plants operable in the world, including 2 newly restarted in Japan, which has an additional 41 still shut down. These nuclear reactors require approximately 150 million pounds of uranium annually. In addition, the WNA lists 65 reactors under construction, 165 being planned and 324 being proposed.

Industry Overview

Uranium is used as a fuel for nuclear power plants that generate electricity. Current worldwide production of uranium falls significantly short of consumption. The worldwide production of uranium fell by 5% to 124.0 million pounds in 2014 from 130.6 million pounds in 2012.

Ux Consulting Company, LLC reported that the gap between production and demand was filled by secondary supplies, such as inventories held by governments, utilities and others in the fuel cycle. These secondary supplies have been satisfying 25-30% of worldwide demand, but as they are depleted, future production will need to rise closer to expected growing demand.

Many analysts have been calling for improved uranium prices over the mid-term from a supply deficit as uranium market fundamentals for supply and demand improve. Uranium demand is expected to increase over the mid-term from an increase of nuclear power generation in China, and to a lesser extent, India, Russia and other countries, including new capacity under construction in Turkey.

Spot market prices rose from $21.00 per pound in January 2005 to a high of $136.00 per pound in June 2007 in anticipation of sharply higher projected demand as a result of a resurgence in nuclear power and the depletion or unavailability of secondary supplies. The sharp price increase was driven in part by high levels of utility buying, which resulted in most utilities covering their requirements several years out.

A decrease in near-term utility demand coupled with rising levels of supplies from producers and traders led to downward pressure on uranium prices since the third quarter of 2007. A rebound in uranium prices in conjunction with a recovery in commodities in 2010 was curtailed by the Fukushima disaster in Japan.

In 2014, the average weekly spot price of uranium $35.50 per pound compared with $39.00 in 2013 and $49.00 in 2012. During 2014, the weekly spot price of uranium reached a 22-month high of $44.00 per pound in November while the low for the year was $28.00 per pound in May. At year-end 2014, the spot price was $35.50 per pound. These prices are sourced from UxC

In 2012, the spot price of uranium reached a high of $52.50 per pound in January and dropped to a low of $40.75 per pound in November. The year-end 2012 spot price was 43.50 per pound. As of November 4, 2013, the spot price was $34.50 per pound and the long-term contract price was $50.00 per pound.

The ISR Process

The ISR process is a form of solution methods. It differs dramatically from conventional uranium
recovery techniques. The ISR technique avoids the movement and milling of significant quantities of rock and ore as well as mill tailing waste associated with more traditional methods. It is generally more cost effective and environmentally benign than conventional methods. Historically, the majority of United States uranium production resulted from either open pit surface mines or underground techniques.

The ISR process was first tested for the production of uranium in the mid-1960s and was first applied to a commercial-scale project in 1975 in South Texas. It was well established in South Texas by the late 1970’s, where it was employed in about twenty commercial projects, including two operated by us.

In the ISR process, groundwater fortified with oxygen and other solubilizing agents is pumped into a permeable ore body causing the uranium contained in the ore to dissolve. The resulting solution is pumped to the surface. The fluid-bearing uranium is then circulated to an ion exchange column on the surface where uranium is extracted from the fluid onto resin beads. The fluid is then re-injected into the ore body. When the ion exchange column’s resin beads are loaded with uranium, they are removed and flushed with a salt-water solution, which strips the uranium from the beads. This leaves the uranium in slurry, which is then dried and packaged for shipment as uranium concentrates. For greater operating efficiency and lower capital expenditures, when developing new well fields we use a well field specific remote ion exchange methodology as opposed to a central plant as we had done historically. Instead of piping the solutions over large distances through large diameter pipelines and mixing the waters of several well fields together, each well field is being mined using a dedicated satellite ion exchange facility. This allows ion exchange to take place at the well field instead of at the central plant. A well field consists of a series of injection wells, production (extraction) wells and monitoring wells drilled in specified patterns. Well field pattern is crucial to minimizing costs and maximizing efficiencies of production.