Uranium prices are in a recovery cycle

After the Fukushima nuclear accident in 2011, the price of natural uranium remained low for a long time, falling to a low of 17.75 US dollars/pound in 2016, which led to a continuous decline in the global supply of uranium ore production capacity. However, since 2019, as “carbon neutrality” has gradually become a global consensus, market demand expectations have continued to increase, driving the price of uranium gradually higher. Currently, the spot price of UxC's U3O8 has risen to 44 US dollars/pound, a record high of 138 US dollars/pound, while according to CNEA's July 2021 forecast, the spot price of natural uranium will rise to 61 US dollars/pound in 2030. Global natural uranium prices are in a recovery cycle, and the company's market prospects are broad.

Mid-term operating income and net profit were up 99% and -68% year on year, respectively. As of June 30, 2021, the company achieved operating income of HK$1,845 million, an increase of about 99%; achieved gross profit of HK$74 million, a year-on-year decrease of 32%; net profit of HK$45 million, a year-on-year decrease of about 68%, and basic earnings per share of about HK$0.55, a year-on-year decrease of about 68%; gross margin and net profit margin were about 3.99%, 1.95%, a year-on-year decrease of 7.77 and 10.17 percentage points, respectively. The doubling of the company's revenue was mainly due to a sharp increase in natural uranium trade volume during the period; we believe the decline in gross profit and gross margin was mainly due to a sharp rise in natural uranium prices in the same period last year, while natural uranium prices were relatively stable in the current period; the decline in net profit and net profit margin stemmed from: (1) a decline in gross profit margin from natural uranium trade; (2) the joint venture Fission Uranium Corp. was considered a loss of natural sales due to dilution of shares; (3) the joint venture Semizbay Uranium Company (hereinafter referred to as “Xie Company”) due to delivery arrangements Sales volume declined year over year, but Sales volume is expected to continue to grow positively throughout the year.

The acquisition of Ortalek's shares was completed, and the sales volume of uranium ore packages increased dramatically. As of June 30, 2021, the company completed sales of 284.8 tons of uranium from Xie Company's underwriting of mining products, and achieved sales of 7.316 million pounds (equivalent to about 2,814 tons of uranium) of U3O8 international uranium products. The company currently sells 588 tons of uranium per year from Xie Company. After the acquisition of 49% of Ortalek's shares is completed on July 30, 2021, the company's uranium ore package sales volume will rise to an average of about 1,900 tons of uranium per year, an increase of more than 200%.

Risk Reminder

1. The company's natural uranium trade volume declined sharply; 2. The production capacity of joint ventures and joint ventures fell short of expectations; 3. The price trend of natural uranium fell far short of expectations.