Uranium Energy Corp. (UEC) Canadian Equity Research Study

Canadian Equity Research 16 March 2021 Raising Target Price Uranium Energy Corp. Specialty Minerals and Metals Canaccord Genuity is the global capital markets group of Canaccord Genuity Group Inc. (CF : TSX) The recommendations and opinions expressed in this research report accurately reflect the research analyst's personal, independent and objective views about any and all the companies and securities that are the subject of this report discussed herein. Rating SPECULATIVE BUY unchanged Price Target US$3.50 ↑ from US$2.15 UEC-NYSE Price US$2.99 Market Data 52-Week Range (US$) : 0.35 - 3.03 Avg Daily Vol (000s) : 2,401 Market Cap (US$M) : 641.2 Shares Out. (M) : 214.4 Implied Return to Target (%) : 46.0 Enterprise Value (US$M) : 572 NAV /Shr (US$) : 2.27 P/NAV (x) (US$) : 1.32 FYE Jul 2021E 2022E 2023E U3O8 Production (000t) 0 0 0 EBITDA (US$M) (14.2) ↑ (16.0) ↓ (7.5) ↑ Previous (14.9) (13.4) (8.6) Net Debt (Cash) (US$M) (4) ↑ 1 ↑ 9 ↑ Previous (26) (13) (4) FCF /Shr (US$) (0.06) (0.07) ↓ (0.03) ↑ Previous - (0.06) (0.04) 3 2.5 2 1.5 1 0.5 0 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 UEC Source: FactSet Priced intraday 16 March 2021 Uranium Energy Corp. is a uranium explorer and developer with a diverse portfolio of assets located in the Americas. UEC's production-ready assets include its Hub & Spoke ISR portfolio in South Texas and its Reno Creek ISR project in Wyoming, among other exploration and development projects. Katie Lachapelle, CPA | Associate Analyst | Canaccord Genuity Corp. (Canada) | klachapelle@cgf.com | 1.416.869.7294 Strategic acquisition of physical uranium We maintain our SPEC BUY rating and increase our target price to $3.50/sh following the release of UEC’s second quarter financial results. Along with its results, the company announced its intention to purchase physical uranium inventory and provided an update on its balance sheet. Physical uranium inventory purchase: The company has entered into an agreement to purchase 400,000 pounds of uranium concentrates at a price of $27.29/lb - in line with the current spot price of $27.30/lb - for a total cost of $10.9 million. The rationale for the physical uranium inventory purchase is as follows: 1. It takes advantage of current low spot uranium prices, which continue to average below the industry cost of production. In our view, UEC’s purchase is well timed, frontrunning our forecast that uranium prices will rise over 2021 (CGe $36/lb by year-end). We expect UEC's physical holdings to bolster its balance sheet as the uranium prices appreciate. 2. It provides UEC with inventory to support future marketing efforts with utilities that could complement near-term production and accelerate cash flows. 3. It frees up UEC’s domestic mine production for the U.S. Uranium Reserve and U.S. specific opportunities; recall that a key component of our investment thesis is the fact that Uranium Energy Corp is well placed as a potential supplier to the U.S. Uranium Reserve. The Department of Energy is currently in the process of developing an implementation plan for the US$1.5 billion, 10-year reserve with US$75 million already approved for 2021. Allocations for this reserve are expected to be announced in late 2021 or early next year and should be a significant catalyst for UEC’s shares. Strengthened balance sheet: As at March 15, 2021, UEC had ~$65.8 million in cash and equity holdings on its balance sheet, a notable increase from its Q1 balance of ~$15 million. The company recently completed an at-the-market program for gross proceeds of $30 million and subsequently reduced its debt to just $10 million, from $18 million previously on its credit facility. In our view, the company is well funded to advance development and eventual construction in South Texas, predicated on higher uranium prices and/or an allocation of the uranium reserve. As a reminder, UEC's past producing and fully permitted Palangana mine in South Texas could be in production within 6-9 months of a production decision, and at a capital cost of just $3 million. We continue to forecast first production in late 2022, contingent on a project sanction decision in early 2022. Increasing target price to US$3.50/sh; maintain SPEC BUY: We are increasing our target price to US$3.50/sh (from US$2.15/sh previously). Our revised target price reflects an increase in our NAVPS as a result of the announced uranium purchase and our projected 12-month return based on our uranium price forecast as at May 1, 2022. We have also updated our estimates to reflect recent share price appreciation for both UEC - we now assume equity raises at this price - and UEC’s investment in Uranium Royalty Corp (+144% in 3-months). As a result, our NAV has increased 15% to US$2.42/sh. We have also updated our multiple to 1.4x NAVPS (from 1.0x) to reflect current trading ranges (1.32x), improving uranium market sentiment, and what we view as an improved likelihood that UEC is able to advance its operations with support for the U.S. Uranium Reserve. Our target price is now forecast as at May 1, 2022 (previously February 1, 2022). Given the 17% implied return to our target, we maintain our SPEC BUY rating. For important information, please see the Important Disclosures beginning on page 4 of this document.