Phishpheet, Sorry for the slack response – I was on gardening...

Phishpheet,

Sorry for the slack response – I was on gardening leave.

Look at this presentation . Hopefully it will give you an idea on the type of uranium deposit that is found at Lance, i.e. a roll-front uranium deposit - if this is teaching you how to suck eggs, my apologies. A Google search would also cough up some interesting information.

I’m not a geologist but my understanding of the genesis of these deposits is that the distribution of uranium is not homogeneous, both laterally (easting/northing) and vertically (below topographical surface). The consequence is that many hundreds (thousands?) of wells are required to extract the uranium (injection and extraction wells). Of course, PEN (should) know where to drill these wells, since the exploration drilling that was done previously, would have indicated to them the ‘exact’ location of each roll-front. So, to answer your first question, the ore zones are not homogeneous, but if it is known where the roll-fronts are located then it’s an easy exercise to mitigate this non-homogeneous distribution by drilling lots of wells in the correct location. But of course, this costs money. I could pour over all the historic drill results and either confirm or confound my unqualified opinion but I don't have time for that. Sorry.

Your second question about HH 10 being targeted as a “sweet spot for output” (note that HH 10 is still in Mine Unit 1 to the best of my knowledge – MU1 was originally only supposed to have 7 HH’s but do to the difficulties in recovering the uranium, additional HH’s have been brought on line prematurely). It would make sense for PEN to "high-grade" the plant if HH 10 is in fact higher grade than the other HH’s – I don’t know that to be the case. My suspicion is that PEN just wants/needs a fresh ore zone to replace the uranium that other ore zones in other HH’s have failed to deliver (the uranium is there, it just cannot be extracted). Furthermore, if the low acid chemistry is the silver bullet they hope it to be (I have grave doubts btw), it wouldn't make much sense to expose the high-grade ore zones to the poorly performing alkaline chemistry. So bringing on HH 10 is just to maintain the reduce production guidance of 22,500 to 27,5000 lb per quarter. I would be interested to know how much uranium was planned to be recovered from each HH (1 to 9) and how much uranium was actually recovered. On the data available, my guess is 20% to 25%. Perhaps interested shareholders should ask PEN this question at the upcoming webcast. This is a very important question as it speaks to stewardship of the resource.

Your third question about MU2 being higher grade. Again, possible, but in my view, unlikely. It is common practice to high-grade process plants in the early years to maximise production, maximise revenue and generate cash-flow asap to pay back the capital cost of the plant. My guess is that MU1 is the best of the bunch. Note, this guess could be entirely wrong – I don’t have enough info to be sure. It could be that MU1 is ‘average’ grade but was selected for start-up due to its proximity to the process plant. This raises an interesting point. That being that as HH’s get further and further away from the process plant, operating costs will increase due to increased pumping cost. I would suggest that the pumping cost is a major component of the C1 cost so this requires consideration in long term evaluation.

Hope this answers your questions.