Peninsula Energy - Poised for Production as Uranium Market Tightens

• Peninsula Energy is preparing to restart uranium production at its Lance project in Wyoming by the end of 2024, with expected production of 700,000-900,000 pounds in 2025.
• The company is expanding its processing plant capacity from 1 million to 2 million pounds per year and adding the capability to produce finished yellow cake on-site.
• Peninsula has contracts for 40-50% of its planned production over the next 10 years, providing a base level of revenue while allowing upside exposure to rising uranium prices.
• The company sees strong uranium demand growth driven by expanding nuclear power generation globally, with supply struggling to keep pace.
• Peninsula views its Lance project as a potential world-class asset, with current resources of 58 million pounds and exploration potential to expand to 100-160 million additional pounds.

Peninsula Energy (ASX: PEN) is an Australian-based uranium development company that is on the cusp of restarting production at its flagship Lance Projects in Wyoming, USA. With uranium prices recovering from multi-year lows and nuclear power gaining renewed interest as a carbon-free baseload energy source, Peninsula appears well-positioned to capitalise on improving market fundamentals.

Interview with Chief Executive Officer, Wayne Heili

Near-Term Production Restart

Peninsula Energy is in the final stages of preparation to restart uranium production at its Lance in-situ recovery (ISR) project in Wyoming by the end of 2024. The company has undertaken significant plant upgrades and well-field development work to enable a smooth transition back to operational status. Wayne Heili, Peninsula's Managing Director and CEO, provided insight into the production ramp-up plans:

"We think in 2025 we can produce between 700,000 to 900,000 pounds in our first year in a ramp-up, and that's really strong. That's based on the preparation work that we're doing."

This initial production target represents a substantial portion of the expanded capacity of 2 million pounds per year that Peninsula is building into its processing facilities. The company is investing in doubling the front-end capacity of its plant, expanding from a 1 million pound to a 2 million pound per year facility. Additionally, Peninsula is adding the capability to produce finished yellow cake on-site, eliminating its previous reliance on third-party toll milling services. Heili emphasised the visual progress being made at the site:

"There's a tremendous amount of construction going on. We've been pouring foundation slabs, setting equipment, putting the structure up."

This on-site construction activity underscores Peninsula's commitment to achieving its year-end 2024 production restart target. The company appears to be progressing steadily towards this goal, with key milestones like wellfield development and plant upgrades advancing on schedule.

Experienced Team & Operational Readiness

A critical factor in Peninsula's ability to execute its production restart plans is the depth of experience within its operational team. Heili highlighted this strength, stating:

"We have a tremendously experienced team, over 200 years of uranium production operations between us."

This collective expertise spans multiple uranium projects across the United States and internationally, providing Peninsula with knowledge in ISR uranium production. Importantly, the company has retained much of the team that was involved in the initial production phase at Lance in 2016, ensuring continuity and familiarity with the project's specific characteristics.

The retention of key personnel during the production hiatus demonstrates Peninsula's long-term commitment to the Lance project and should help mitigate operational risks as the company returns to production.

Contract Book and Market Strategy

Peninsula Energy has taken a balanced approach to marketing its future uranium production. The company has secured contracts for approximately 40-50% of its planned production over the next ten years, providing a stable revenue base while maintaining exposure to potential uranium price upside.

Heili explained the company's strategy: "Today, we have a nice contract portfolio. We're working with a number of customers who are going to take 40 to 50% of our future production in the next 10 years. We're not in a hurry as a company to commit more to the market, especially in fixed-price mechanisms."

This approach allows Peninsula to benefit from its existing contract book while retaining the flexibility to capitalise on potential future price increases. The company appears to be taking a patient stance on additional contracting, believing in the long-term upward trajectory of uranium prices. Heili further elaborated on the contracting strategy:

"We're more inclined to participate in market-based contracts, if anything, market-priced contracts, rather than fixed."

This preference for market-linked pricing in future contracts aligns with the company's bullish view on uranium market fundamentals.

Lance Project: Resource Base and Growth Potential

The Lance Projects represent Peninsula Energy's core asset, with a current resource base of 58 million pounds of U3O8. However, the company sees significant potential to expand this resource through additional exploration.

Heili outlined the scale of this opportunity: "The exploration target on the Lance project itself is between 100 and 160 million additional pounds. This, forward-looking, has the potential to be a 200 million pound project."

This exploration upside, if realized, would elevate Lance into the ranks of world-class uranium deposits. The potential for resource expansion also provides the Peninsula with options for future production growth beyond its initial 2 million pounds per year capacity.

In addition to the core Lance area, Peninsula acquired the nearby Dagger project in 2023, which Heili described as "very interesting because it has twice the grade and can be economically very attractive to produce at Dagger." The higher-grade nature of the Dagger project could potentially provide Peninsula with a source of lower-cost pounds to blend with Lance production in the future.

Uranium Market Outlook

Peninsula Energy's production restart plans come amid an improving backdrop for the uranium market. Global nuclear power generation is expanding, driven by growing recognition of nuclear's role in providing carbon-free baseload electricity. This trend supports increased uranium demand, while years of underinvestment in new mine development have constrained supply growth. Heili touched on these market dynamics:

"The demand is obviously ramping up. The world has an ambition to triple nuclear power by 2050. Who knows where the supply will come from..., the world needs more mines. We must ramp up production."

This supply-demand imbalance has contributed to uranium prices' recovery from the lows seen in the wake of the 2011 Fukushima disaster. While prices remain below the levels needed to incentivise significant new mine development, the trend appears supportive of continued price appreciation.

Financial Position and Funding

Peninsula Energy has successfully navigated challenging market conditions in recent years, raising capital to fund its Lance project upgrades and preparation for production restart. While these fundraising efforts have resulted in share dilution, they have positioned the company to capitalise on improving uranium market fundamentals.

Looking ahead, Heili expressed optimism about Peninsula's financial trajectory: "We expect that by this time next year, we'll be in a position where we're free cash flow positive." This projected transition to positive cash flow would mark a significant milestone for the company, potentially allowing it to self-fund future growth initiatives and exploration activities.

Competitive Positioning

Peninsula Energy's Lance project stands out among US ISR uranium producers for its scale and growth potential. Heili noted:

"There's never been a US ISR producer that's produced 2 million pounds a year."

This positions Peninsula to become the largest ISR uranium producer in the United States once it achieves full production capacity. The company's Wyoming location also provides strategic advantages. U.S. utilities increasingly focus on securing domestically sourced uranium to diversify away from historical reliance on imports, particularly from Russia. Peninsula's ability to offer U.S.-origin uranium could be attractive to domestic utilities seeking to enhance supply security.

Risks & Challenges

While Peninsula Energy appears well-positioned for its production restart, investors should be aware of potential risks and challenges:

• Execution risk: The company must successfully complete its plant upgrades and wellfield development on schedule and budget to meet its production targets.
• Operational performance: As with any mining operation, there is a risk that actual production rates or costs may differ from projections.
• Uranium price volatility: While the long-term outlook appears favourable, short-term uranium price fluctuations could impact profitability and cash flow.
• Regulatory environment: Changes in nuclear power policies or uranium mining regulations could affect demand or operating conditions.
• Funding requirements: If production ramp-up is slower than anticipated or uranium prices weaken, the company may require additional capital.

Peninsula Energy stands at an inflexion point as it prepares to restart uranium production at its Lance project. With an experienced operational team, a balanced contract book, and significant resource growth potential, the company appears well-positioned to benefit from improving uranium market fundamentals. As Peninsula transitions from developer to producer over the coming year, it offers investors exposure to the recovering uranium sector through a U.S.-based production story with meaningful scale.

The Investment Thesis for Peninsula Energy

• Near-term production catalyst: Production restart expected by the end of 2024, providing clear path to cash flow generation.
• Significant scale: 2 million pounds per year capacity positions Peninsula to become the largest U.S. ISR uranium producer.
• Resource growth potential: Current 58 million pound resource base with exploration upside to potentially 200+ million pounds.
• Balanced market exposure: Existing contracts provide revenue stability while retaining upside to uranium price appreciation.
• Favorable jurisdiction: The Wyoming location offers a stable operating environment and strategic value for U.S. utility customers.
• Experienced team: Over 200 years of combined uranium production experience reduces operational risk.
• Macro tailwinds: Growing nuclear power generation globally supporting long-term uranium demand growth.

Peninsula Energy is poised to restart uranium production at its Lance project in Wyoming by the end of 2024, with the potential to become the largest ISR producer in the United States. The company's experienced operational team, balanced contract book, and significant resource growth potential position it well to capitalise on improving uranium market fundamentals. As global nuclear power generation expands and uranium supply struggles to keep pace with demand growth, Peninsula offers investors exposure to the sector's recovery through a near-term U.S. production story.

While execution risks remain, a successful transition to producer status could create meaningful shareholder value. Investors should closely monitor Peninsula's progress towards its production restart target and subsequent operational performance as key indicators of its ability to deliver on its potential.

Uranium Macro Thematic

The global uranium market is experiencing a structural shift driven by growing recognition of nuclear power's role in achieving decarbonisation goals. As countries seek to reduce greenhouse gas emissions while maintaining reliable baseload electricity generation, nuclear energy is increasingly considered a critical component of the energy mix. This renewed interest in nuclear power is supporting long-term uranium demand growth.

Simultaneously, the supply side of the uranium market has been constrained by years of underinvestment following the 2011 Fukushima disaster and subsequent price weakness. Many higher-cost mines were shuttered, and exploration and development activities were curtailed. This has led to a tightening supply-demand balance, with primary mine production currently insufficient to meet reactor requirements.

Peninsula Energy's CEO, Wayne Heili, succinctly captured the market opportunity:

"The world needs more mines. It's just absolutely imperative that we ramp up production."

Inventory drawdowns and secondary supplies have partially masked the supply shortfall, but these sources are finite. As utilities focus on long-term supply security, there is growing recognition of the need for new mine development and the restart of idled capacity.

Geopolitical factors also influence the market, with Western utilities seeking to diversify away from historical reliance on Russian uranium supplies. This trend supports projects in stable jurisdictions like Australia, Canada, and the United States. These macro factors contribute to a gradual recovery in uranium prices, although they remain below the levels needed to incentivise significant new mine development. As the supply-demand gap widens, there is potential for accelerated price appreciation.