Our Strategy

Capital Allocation

We remain on a cautious growth path, taking a balanced approach to capital allocation and subjecting all investment decisions to a rigorous and disciplined review process. This review involves an assessment of our overall liquidity, the overall level of investment needed, and the prioritization of our investment choices based on the merits of each opportunity. Our assessment also takes expected levels of future operating cash flow and the cost and availability of new financing into account. In the context of our uranium growth strategy, we are focused on opportunities to leverage existing infrastructure (brownfield expansion), and on projects with greater near-term certainty. The review may result in good opportunities being held back in favour of higher return projects, and should allow us to generate the best return on investment decisions when we are faced with multiple prospects. Future changes in the market could impact the timing and amount of cash available for future investment in capital projects, acquisitions, dividends, debt repayments and other uses of capital.

This discussion of our strategy and our process to increase our annual uranium supply by 2018 is all forward-looking information. It is based on the assumptions and subject to the material risks discussed here, and specifically on the assumptions and risks listed here.

Assumptions

Our statements about increasing annual supply by 2018 to 36 million pounds reflect our current supply target for 2018. Although we are confident in our efforts to reach that target, we cannot guarantee that we will. We have made assumptions about 2018 production levels at each of our existing operating mines. We have also made assumptions about the development of mines that are not operating yet and their 2018 production levels, and about uranium by-product supply from the Talvivaara mine. We believe these assumptions are reasonable, individually and together, but if an assumption about one or more mines proves to be incorrect, we will not reach our 2018 target supply level unless the shortfall can be made up in other ways.

Material risks that could prevent us from reaching our target

• we cannot locate additional mineral reserves to extend Rabbit Lake’s mine life to maintain production
• our partner or the Kazakh government does not support an increase in production to the expected level at Inkai, blocks 1 and 2, or we do not reach the full production level as quickly as we expect
• development at Cigar Lake is not completed on schedule, or we do not reach the full production level as quickly as we expect
• the Key Lake mill does not have enough capacity to handle anticipated production increases, and we are not able to expand its capacity or to identify alternative milling arrangements
• we are unable to obtain the expected level of uranium by-product supply from the Talvivaara mine
• our mine expansion and development projects do not proceed or, if they do, are not completed on schedule or do not reach full production levels as quickly as we expect
• uranium prices and development and operating costs make it uneconomical to proceed with our mine expansion and development projects
• we cannot obtain or maintain necessary permits or approvals from government authorities
• disruption in production or development due to natural phenomena, labour disputes (including an inability to renew agreements with unionized employees at McArthur River and Key Lake), political risks, blockades or other acts of social or political activism, lack of tailings capacity, or other development and operation risks.