PEN Chart, page-37

Hi ValueInvestor,

I'll keep the portfolio positioning undisclosed but it is the single biggest speculative sector positioning I have now But I can hopefully help a little:

- I think that the U theme is very similar to what happened in gold in late 2015. If I am right, it won't matter too much which vehicles you are invested in as the narrative will carry all U themed plays higher. The positioning is more important if I/ we are "wrong" and U either takes longer to rise or, for some reason, doesn't recover. I think, however, that this is a low probability outcome.

- With all due respect to the Australian plays, the best exposure is via the non Australian markets as these plays include:

(a) Commodity exposure itself (UPC, YCA)

(b) Largest producer (CCJ)

(c) Athabasca explorers and developers where the highest grade projects are (NXE, DNN, FCU, PTU, SYH, etc, etc) and most "investable" for other Western investors (and these are the guys you want to eventually buy you out of your position)

(d) American plays that MAY get upside from S232 (UUUU, UEC, URE, etc)

- Australia does have some excellent plays as well, however, IMO and the following all have specific niches within my portfolio:

(a) PDN - getting a $1 for pennies due to the unfortunate experience of previous equity/ debt providers. This company can also get back into production early once prices become more realistic

(b) PEN - S232 exposure obviously, and both risk/ opportunity due to the proposed chemistry change at Lance. It has downside protection due to cash position and in-the-money contracts

(c) BOE - Honeymoon project is also near term producer and it appears that they have made process changes to improve the economics and have lots of exploration upside

(d) BKY - A good project in Spain, however, there are risks regarding permitting of Zona 7 and environmental pushback which is delaying the project. The flipside is that they are fully funded.

- In terms of market catalysts, as discussed, I am speculating on some/ all of the following occuring:

(a) CCJ announce continued production cuts - either from extending McArthur River shutdown or temporarily suspending Cigar Lake when MR restarts

(b) Kazatomprom enforce their announced 2018/9 production cuts in the lead up to and subsequent to their Q4 2018 IPO

(c) Rio announcing that Rossing will be suspended, either temporarily or permanently once their contracts roll over and the mine is exposed to spot prices

(d) Ranger ceases supplying the market within 18 months and, in the interim their supply volume to continue to drop away

(e) Continued investment into YCA and UPC which in turn increases spot U demand as this capital is used to mop up mobile U

(e) CCJ entering the spot market in the 2H 2018 and 2019 and buying material volume

(f) S232 being successful with, potentially, Russian and Kazakh U imports being halted. This should benefit US domiciled producers and possible Australia and Canadian ones too.

(g) Continued Japanese reactor restarts as the Government has reaffirmed its commitment to U generating c. 22% of Japanese electricity in 2030

(h) Potential for Germany to reverse its policy on nuclear energy as the evidence is growing that this has been a terrible policy, both financially and environmentally

(i) Continued news that new reactor builds are being planned or started, "baking in" the LT demand growth for U. I also expect the continuation of aging, western domiciled reactors to be granted licence extensions.

(j) Growing positive financial media articles about U and the increasing awareness amongst investors that U prices must go up which in turn creates the self fulfilling positive feedback loop for spot U and miners.

Based on the above, I think that the biggest risk is having all your eggs in one basket/ all your money on one horse ... and the sector bolts and for some perverse reason the single vehicle that one has chosen is an absolute dog.

That's how I am doing it anyway mate.

Cheers
John