Equity Strategy June 8, 2008:

Over the past few months the excitement surrounding uranium companies has seen a substantial reduction. Interest in the sector became a little over done last year as the uranium price surged to over $125.00 a pound. The speculative interest in the uranium and nuclear sectors reached a point which was unsustainable and the inevitable correction took place pushing the price back down to the current level of $60.00 a pound.

It is interesting to note that the long term contract prices did not go through this correction and have been consistently trading at between $85 and $95.00 a pound over the past twelve months. This is the price at which most of the production will have been sold at over the past year the more volatile spot price has been reflecting short term concerns regarding supply and is influenced by the increase in speculative buying by funds and uranium consumers building additional inventory.

The uranium market is most accurately reflected by the contract prices which will generally be the price at which new production is sold. The uranium market is of course dominated by electrical utilities which require a secure long term supply of uranium in order to effectively and safely operate their facilities. The unique nature of nuclear power generation forces the power generation companies to lock in supply over long periods of time and does not allow for a just in time delivery plan. Over the past year or so it appears that both producers and consumers of uranium have been able to agree to meet in the middle of the widely fluctuating range of the spot price of uranium maintaining a stable and consistent pricing model during the recent historic volatility in the spot price.

It seems that many investors have been preoccupied with the short term pricing in the market and have not fully valued uranium producers who have been operating in a relatively stable market trading at all time historic highs. The fundamentals of supply and demand favor a slightly rising price for uranium due to the planned expansion of nuclear power facilities world wide.  According to the World Nuclear Association (www.world-nuclear.org) there are currently 439 nuclear reactors operating globally and there are 36 under construction and an additional 93 expected to be completed over the next 8 years.  If all of the additional reactors are brought on line over the next 8 years uranium demand will increase by 25% from currently levels. It is likely that over the next decade considerably more power will be produced by nuclear reactors due to the global move to reduce greenhouse gas emissions.

Canada is one of the largest producers of uranium and the increase in global nuclear power production will benefit a number of Canadian companies such as Cameco (CCO-T) which is the world’s largest uranium producer accounting for approximately 20% of total global supply. The company is in an excellent position to capitalize on increased demand by controlling 45% of the forecast new production to come on stream over the next decade. The company has been and will continue to be the leader in uranium production globally centered in the Athabasca Basin region of Northern Saskatchewan. The company has four key mines in the Athabasca Basin McArthur River, Key Lake and Rabbit Lake which produce approximately 21 million pounds of uranium annually, while Cigar Lake, the largest undeveloped high grade deposit in the world is expected to be in production by 2010. Production at the Cigar Lake mine has been delayed due to a flood in 2007 which caused substantial damage and pushed back initial production by approximately 2 years.

In addition to the Athabasca basin mines Cameco operates the Smith Ranch-Highlands mine in Wyoming and the Crow Butte Mine in Nebraska and the recently started Inkai Mine in Kazakhstan which is expected to be a full production of 5.2 million pounds annually in 2010.

In addition to uranium production the company also operates the Blind River Refinery, the world’s largest, the Port Hope conversion plant and Zircatec Precision Industries which manufactures and sells fuel bundles for Candu Reactors. Also in Ontario the company owns Bruce Power which operates 6 Candu nuclear power plants in the province.

This uranium power house is positioned to continue to dominate the sector for years to come and should be considered a core holding for long term diversified investors.

Denison Mines Inc. (DML-T) is another Canadian company in the uranium sector that is very well positioned for growth. The company operates the McClean Lake Mine and Milling facility located in the Athabasca basin of Northern Saskatchewan. The McClean Lake facility is licensed to process up to 8 million pounds of uranium annually processing ore from the McClean Lake mines and the Cigar Lake mine. The JEB Tailings Management Facility converted from the JEB open pit mine, is located in the same area and has been designed to accommodate tailings from the processing of ore from McClean Lake and Cigar Lake mines. The initial design life is estimated to be 25 years, the recent addition of the Sue B open pit will substantially extend the facilities design life.

Denison Mines Operates the White Mesa Mill in Blanding Utah which is strategically located close to the company’s three mining operations in Colorado, Utah and Arizona.

In addition to the mining and milling operations Denison manages the publicly traded Uranium Participation Unit (U-T) which invests in uranium concentrates or uranium hexafluoride. The unit offers investors an opportunity to invest directly in the uranium market.

The uranium sector offers excellent potential for long term capital appreciation as the world turns to nuclear power generation in an effort to reduce carbon output associated with global warming.