Uranium Trend Commentary

The following summary of the uranium industry has been based in its entirety upon the following sources: (i) miscellaneous published reports available at www.world-nuclear.org; and (ii) UX Nuclear Fuel Price Indicators published by the Ux Consulting Company LLC. All opinions, expectations and estimates contained in the following industry summary which are not specifically ascribed to management of the Company are solely those of the authors of the aforementioned reports and sources. See also "Cautionary Statement Regarding Forward Looking Information" and "Risk Factors".

Uranium Industry Trends
A number of trends in the nuclear industry have the potential to affect the Company's business environment. Current trends are encouraging for explorers and producers of uranium. The uranium spot price has appreciated approximately 1200% since January 2001. By year end 2006 the spot price was US$72 per pound U3O8, an increase of 100% from the 2005 year end spot price of US$36.25 per pound U3O8. As of September 24, 2007, the weekly spot price was US$85 per pound U3O8.

In recent years, the nuclear industry has seen increased capacity at existing nuclear plants, extensions of plant licenses, and new plant construction. The Company believes that public opinion in many countries has moved in favour of nuclear power, and rising natural gas and oil prices have made nuclear energy the lowest cost option in some countries. In the United States, other than hydro, nuclear energy is the cheapest source of electricity. Global warming concerns support increased interest in nuclear power.

Uranium Supply and Demand
Uranium supply sources include primary mine production and secondary sources. Principal primary producers of uranium include Cameco Corporation (18% of global mine production in 2006), which produces principally from deposits in the Athabasca Basin of northern Saskatchewan, and Rio Tinto from mines in Australia and Namibia. In 2006, 46,499 tonnes of U3O8 were produced globally, while the current usage is about 66,500 tonnes of U3O8 per year. The resulting shortfall has been covered by several secondary sources including excess inventories held by utilities, producers, other fuel cycle participants, reprocessed uranium and plutonium derived from used reactor fuel, stockpiles from Russia and the United States amassed for nuclear weapons and uranium derived from the dismantling of Russian nuclear weapons. However, Russia has indicated that it will not renew its uranium agreement to supply the market with its stockpiles after 2013 and the U.S. plans to slow its uranium sales this year considerably.
Secondary sources of uranium will decline in importance as excess inventories and recycled uranium from nuclear weapons are progressively consumed over the next decade, resulting in the need for further primary mine supply.
Demand for uranium is directly linked to the level of electricity generated by nuclear power plants. Nuclear electricity generation worldwide is growing, since world nuclear generating capacity continues to expand as more reactors are built than are closed, and existing reactors are being operated at higher capacity.

According to the World Nuclear Association, currently about 16% of the world's electricity (almost 24% in developing countries) is generated from 439 nuclear reactors. Sixteen countries rely on nuclear power for 25% or more of their electricity. France and Lithuania get around three-quarters of their power from nuclear energy, while Belgium, Bulgaria, Hungary, Slovakia, South Korea, Sweden, Switzerland, Slovenia and Ukraine get one-third or more. Japan, Germany and Finland get more than a quarter of their power from nuclear energy, while the USA gets almost one fifth. Over 30 further nuclear power reactors are under construction, equivalent to 7.5% of existing capacity, while over 80 are firmly planned, equivalent to 24% of present capacity.

Long Term Outlook
In 2000, uranium spot prices reached 26 year lows of less than US$7.00 per pound U3O8 due to the increased availability of secondary supplies, short term lower demand, and increased inventory sales. The spot price has since increased to US$85 per pound U3O8 as of September 24, 2007, and the long term uranium market outlook remains positive with increased consumption, and the continuing draw down of secondary uranium sources. Given the lead time necessary to find and develop new mines, the projected gaps in both supply and future depletion of existing high grade uranium deposits means that uranium exploration must be accelerated in order to meet future demand.

The recent resurgence of concern over energy security and supply, and the corresponding interest in nuclear power as a reliable and clean source of energy has heightened the awareness that new uranium supplies will be needed in the long term. The new uranium production is likely to come from deposits in Australia, Kazakhstan, Canada and the United States. Most deposits generally have much lower grades than the high grade deposits in the Athabasca Basin, and consequently it is anticipated that the new supply will come at higher cost, which is expected to put further upward pressure on the uranium price over the next ten years.