Uranium Energy Corp. (NYSE: UEC) CEO Amir Adnani on 2019 Plans: Continuing to Advance the Permitted Burke Hollow ISR Project & Consolidated Reno Creek ISR Project with an Eye on Section 232

February 22, 2019

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Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the President and CEO of Uranium Energy Corp. (NYSE: UEC), Mr. Amir Adnani. Amir, how are you this morning?

Amir Adnani: Excellent, Gerardo. I'm doing really well. Thanks for having me back.

Gerardo Del Real: Thanks for coming back on. You know the last time we spoke it was towards the end of 2018. I had mentioned at the time that it had been a bit of a quiet period for the company. You issued a shareholder letter early in January that kind of outlined what the trajectory of the company was going to be, at least for the first several quarters in 2019.

Sure enough, you've executed well. Just this morning you had some news. You received your radioactive material license for the Burke Hollow ISR project in South Texas. I actually just drove by there this past weekend. Pretty impressive. You took this from discovery to full permit in just under six years. Can we start there? And then I'd love to ask you about Reno Creek as well.

Amir Adnani: Yeah, I would love to do all of that. I think the fourth quarter of 2018 was really focused on making sure that we had a strong and flexible balance sheet to then do the things that we're doing now on project development, right? So if you look at Q4, we had that successful equity raise that we did in October, and then created even more flexibility by extending the credit facility that we had with Sprott out to 2022. So I think we were able to come into 2019 from a financially strong position, Gerardo, and then really kind of execute on some of the things that we've been working on for a long time. Burke Hollow is one of those projects we have been working on for a long time, as you point out.

I'm proud of this milestone with this final permit here for not just the fact that it represents an important permit, but the fact that Burke Hollow as a project really displays the various skillsets that UEC has inside the company. You and I have talked about this, you're based in Texas and we've talked about how in South Texas you're really dealing with all privately-owned land and how complicated and cumbersome leasing could be. You can't just walk in and stake claims on state property or federal property. It's all very complicated and in some cases very time consuming just to be able to lease the land. So, on display at Burke Hollow you had the fact that our land team was able to successfully lease this property. It took us a number of years to actually put together the approximately 20,000 acres.

Then you had our exploration team literally go from grassroots concept to discovery to resource delineation. We've drilled over 700 holes here. You have our permitting team and their capabilities on display with numerous permits that have been issued. The permitting body which speaks to the long lead item in this business, which is permitting, how it takes really five to seven years, and that's when you're in friendly jurisdictions like Texas and Wyoming. That's how long it takes. So it's quite important to see how valuable it is when a company like ours can say look, we have not just one fully permitted project, but we now have three projects with permits in South Texas; Burke Hollow, Palangana, Goliad. You've got the Hobson Plant, you've got Reno Creek. Given how long it takes to get these permits, I think that's really key.

The other dot that all connect on South Texas and what Burke Hollow, I think, represents is this potential. The potential that you've heard me say that the US Geological Survey has spoken about, has written about. Once in 2015 and also in 2017 where they said that based on their studies and assessment, there's potential for over 200 million pounds of ISR-amenable uranium resources within the South Texas uranium belt. Well, a project like Burke Hollow, going from grassroots to discovery to this growing resource, definitely demonstrates that potential. That's really exciting to have that kind of possibility in our back yard. Obviously, UEC has very deep roots in South Texas.

The other thing that's on display here, and it might be lost on a lot of people, so your listeners might appreciate this, but we've developed the entire resource at Burke Hollow through our PFN drilling machine and technology that we have. This is a commonly used technology in the US for drilling sandstone-hosted uranium deposits where you get an instantaneous reading of the uranium grade that's analogous to coring and doing a chemical assay through sending core to lab. When you send core to lab and get chemical assay back, it takes time and there's a turnaround time that might cost a bit more, of course. With the Prompt Fission Neutron or PFN technology, these probes are designed to get our exploration team an instantaneous read of the uranium grade. So, you're drilling a hole that day and you know that day what the result is. And that's quite phenomenal.

The company that had this technology basically sold out and then there was a bit of a bankruptcy situation. The reason why they went bankrupt is because no one's been drilling for uranium in the US for the last decade. Burke Hollow, it's interesting to note, is the only new grassroots discovery in the US of its type, of any uranium deposit in the last decade. So, it wasn't a good business to be in if you were a service provider to the uranium exploration industry in the US. We were able to buy that company, the probe, the technology, and the IP. That's another thing I'm excited about because it really allows us to not only turn around our exploration at our own projects for a very low cost, but if we see a nice re-emergence of interest in the US uranium industry for exploration and development and production, this technology could also be very valuable. It’s something that we could maybe provide on a wider scale to the industry.

So, coming back to your question about Burke Hollow, sorry for that long answer. But there's, I think, a lot of different components here. If you unpack this news that we announced on Feb 20th, you can see, I think, a lot of key strengths that UEC has on the human capital side is all really represented in this news that has come out on Feb 20th.

Gerardo Del Real: You touched on the capital raise that happened here a few months back and the credit facility and for those that may say, hey, you know, this is dilutive, I couldn't help but notice that you're locked and loaded, ready with a drilling campaign for Burke Hollow. I believe you're supposed to start drilling in early March. There's 20 delineation holes and the installation, according to the release, of approximately 120 monitor wells.

When you go into a raise, a financing, can you explain for people that may be new to the business and don't get that aspect of it why you've got to be preemptive with those?

Amir Adnani: Well, I think the resource business is really, especially for development stage companies that are not producing the commodity to be able to access capital to advance projects and de-risk them, that's basically what you're set up to do. I mean, that's the necessity. The idea always is that you can, and you envision over longer term the value you create by drilling and permitting and so-called de-risking a project, that value being created is offsetting the short-term effect that dilution has, which no one likes. I mean look, as the largest individual shareholder of UEC who's been at this now, building this company as the founder of it for over 14 years now, I don't like dilution of my own equity position any more than the next shareholder. But the reality is the projects need to be advanced and their advancements in the longer term, especially at a higher uranium price, will position the company to ultimately be a winner.

So look, I think there's also this thing and you get this, that there might be traders or shorter term investors in any market and that's okay and that's needed and there's nothing wrong with that, but companies are not built on the short time frame, especially not in the mining business. When I just told you it takes five to seven years to permit a uranium project, you can appreciate this is not really a business where if you're building for the long term you can be thinking about the short-term market gyrations. You have to be financially strong, cashed up, to be able to drill, develop. Also, we're coming into an environment, potentially – and again, we have to see what happens with the President's decision this summer – but, Gerardo, if we end up with a positive outcome for this US government assessment and investigation into shortages of uranium as a national security matter, if the outcome is a favorable decision that puts a premium on US projects, you and I know that it's going to cause a footrace in the US and people in companies are going to really come in and look to higher personnel, higher rigs, grab land, and look to develop.

Well, in that instance, we want to make sure we're also financially strong enough to win that footrace, to be able to move ahead of any potential competition, to be in a good, strong position, not only with assets we spent 14 years developing, and also be able to move quickly to and respond to any catalysts, cash on hand and having a strong balance sheet. All those things improve your odds and also just set you up for better success. I hope I've answered your question.

Gerardo Del Real: Well said. It's why I'm a shareholder. Far from a one-trick pony, UEC also recently, I want to say, consolidated the Reno Creek uranium district. You've been at this for over two years. You also mitigated the risk there, frankly. You got a new 43-101 on the Reno Creek ISR project which now I believe makes it the largest permitted pre-construction ISR project in the US. Can you talk about that project a bit?

Amir Adnani: It's definitely a consolidation play and it's a consolidation play that sort of had to be done. Someone had to do it. I'm glad it was us. I believe it's the first time since the 1980s that this project has finally been consolidated under one company's ownership. Consolidating it had one simple benefit that you would end up with this very large, fully permitted ISR project. And as you said, it's not just very large, it happens to now be the largest permitted pre-construction ISR project in the country, in the US.

So, that's another situation where it took, as far as what meets the eye in terms of our announcements, it looks like we did it over two and a half years. If I go back and look at my records, I think we were trying to do this maybe even starting back in 2014. So, it takes a long time to chase opportunities, have discussions, go back and forth, and these things really do take a long time to come together.

I remember when we first got into this business, when I first started UEC, Gerardo, there was always a lot of the guys back 14 years ago that had been doing it a long time. I would say that longer term to have a very robust ISR uranium company in the US, you need to be in Texas and Wyoming. You have to be in both places. And as you know, UEC's been primarily a Texas-focused company for most of our life as a company. I always felt this healthy competition with our friends in Wyoming and thinking Texas, things are bigger and there's more potential. But really, in the back of my mind, I think the idea was if we can find the right opportunity to also be in Wyoming, yes, it does make sense to have a base in Texas and a base in Wyoming for this to be kind of a two-pronged approach. The two states that have had the longest and greatest amount of ISR production history in the country.

That to me is kind of what's fundamental here. That we finally have managed to do that. It's taken 14 years to finally put in place a really proper and well developed, permitted piece of assets in South Texas. That's pillar number one. Pillar number two is now this Reno Creek consolidation in Wyoming, gets us that end of it covered. Lot of technical synergies. On our weekly operations call, when we've got our team in Wyoming, our team in Texas, these guys are talking the same language when it comes to talking about sandstone-hosted uranium deposits that you can mine with ISR. Lot of ideas that could be done in terms of our team collaborating and thinking about best practices around ISR.

Again, it's exciting what has happened at Reno Creek for us. I think you saw in the shareholder letter, between now and the decision that the government and the President will make, our focus would be on advancing our South Texas and Wyoming projects first and foremost because that's where we're going to get the best bang for our buck. That's where I believe we'll get the best shareholder returns is by prioritizing our US assets. And as you point out at Burke Hollow, we're going to commence a development drilling program in early March. The team's just mobilizing for that right now.

We have an economic study on the way at Reno Creek. All this work will be in preparation leading up to the US government decision. It feels like this year is really going to be all about the first half of the year and then the second half of the year, right? The second half of the year will have the 232 and the US government decisions behind us. One way or other the industry, both in the US and globally, can move forward. And I think it's going to be positive one way or other.

Gerardo Del Real: You position the company well to deliver supply at higher prices. You like to say you're completely unhedged. I want to present a little context referencing your shareholder letter on the demand side. With 98 operating reactors, the US has the largest nuclear fleet in the world with annual requirements of about 45 million pounds of uranium per year. In contrast, US mines are projected to produce less than 400,000 pounds in 2019. Not enough for even one reactor. Anything to add to that, Amir?

Amir Adnani: I almost want to just re-read that just to repeat what you just said. That paragraph says it, what you just read says it all. That there's not even enough uranium being mined in 2019 to meet the needs of one reactor out of 98. It is so compelling. It's both compelling and, frankly, scary. No, I don't have anything else to add to that. I mean, that's the crux of the matter. If you're at all ever wondering, any of your listeners, any of your followers wondering what is this whole US uranium thing all about? That's it right there. That's what it's about.

It's funny. I had someone call me up the other day and say well, is this like the automobiles, I want to put tariffs on that. That's crazy. That's not a good idea. That can't possibly be national security. I said, you know, maybe there isn't a case of national security with automobiles, I don't know. But I think in the case of uranium, it's pretty darn clear. Like, how could the country be dependent on almost all of its uranium needs on foreign imports? That really doesn't seem like a stretch of the imagination even, to say that that is a national security issue.

So, this is going to be a really fascinating kind of few months leading up to the final outcome of this whole thing. I've never seen it like this and I've been at this for over a decade but I can tell you guys that work with me that you know well, Scott Melbye, our Executive VP, he's been doing this for 34 years. Members of our operating team that have been doing this for 30, 35 years, that kind of time frame, have never seen a setup like this before, Gerardo. I think it's just quite fascinating and at times like this, again, it's important to be a well-rounded and strong company. Balance sheet wise, permit wise, people wise. If you've got all those ingredients, then you really stand to get the maximum potential benefit out of all of this.

Gerardo Del Real: Absolutely. I remember in 2008 sitting in my living room watching the markets collapse, looking at my wife and saying they're going to make movies and write books about this. I feel the same way on a positive note about the setup for the uranium sector. I think 10 years from now, they're going to make movies about the money that was made in the space. Knock on wood, fingers crosses, let's see what happens.

Amir Adnani: Sounds great.

Gerardo Del Real: Amir, thank you for your time.

Amir Adnani: Thank you, Gerardo.

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