The only overseas uranium resources development and investment and financing platform under Zhongguang Nuclear Power Corporation.

Zhongguang Nuclear Mining is the only overseas uranium resources development and investment and financing platform of China General Nuclear Corporation (CGN), one of China's three major nuclear power investment operators. Zhongguang Nuclear Power Corporation, formerly known as China Guangdong Nuclear Power Group, was officially established in 1994, and its business can be traced back to the Daya Bay Nuclear Power Station, which was built after China's reform and opening up. Uranium is a radioactive nuclear material distributed in the earth's crust and can be used as the main fuel for nuclear power generation. The company currently owns (1) two operating uranium deposits located in Kazakhstan, named (1) Shemizbey and (2) Irkoli, with JORC reserves of 10.9ktU and 16.3ktU, respectively, (2) an exploration uranium project in Canada, (3) two Kazakh uranium deposits to be merged into the company's production, and (4) CGN GU, an overseas uranium products trader established in the United Kingdom.

Investment theme (1): uranium prices are full of room for rebound

Global uranium prices fell significantly after 2007 as a result of the 2008 financial crisis and the 11-year leak at the Fukushima nuclear power plant in Japan.

Nonetheless, we foresee plenty of room for a rebound in uranium prices as some uranium miners have reduced production in recent years, such as Canadian uranium miner Cameco (NYSE: CCJ), which closed its Rabbit Lake and McArthurRiver uranium mines in Canada and all US mines in 2016-2018. In addition, the Development Reform and the National Energy Administration have earlier issued the "Clean Energy consumption Action Plan (2018-2020)" policy document, which will be clearly included in clean energy. We suspect that the Chinese government will push forward more nuclear power projects and the price of uranium will rebound.

Investment theme (2): cost competitiveness of uranium ore in production

The company's two operations in the Kazakh uranium mine, Shemizbei and Ilkoli, are cost competitive. Compared with the major uranium mines in other international markets, the company's two uranium mining costs are at low and medium levels.

Investment theme (3): the possibility of asset injection into the parent company

The parent company, China General Nuclear Group, currently owns the second largest Hushan uranium mine in Africa and Namibia. We do not rule out the possibility that the parent company will inject this asset into Zhongguang Nuclear Mining in the future, although it will not be implemented in the short term.

Risk hint

(1) delays in project development, (2) global increase in uranium production, and (3) political risks arising from the Sino-US trade war.