By Steven Ralston, CFA

OTCQX:DYLLF | ASX:DYL

READ THE FULL DYLLF RESEARCH REPORT

EXECUTIVE SUMMARY & PROJECT UPDATES

Uranium Industry

The recent increase in the price of uranium has been the driving force behind the recent strength of the stocks of uranium mining companies. Both the spot and contract prices have increased over the last few weeks. This robust pricing structure is now very close to the tipping point where financing for the construction of new uranium mines by junior mining companies can be obtained. Since the end of April, Deep Yellow’s (OTCQX:DYLLF) (ASX:DYL) stock has rallied over 50%.

Outline of Deep Yellow’s Projects

Tumas Project (Namibia)

The Tumas Project is a pre-development-stage paleochannel uranium project. The DFS was completed in late November 2022 and the optimized & finalized DFS was released on February 2, 2023. The base case of the DFS (at US$65/lb. U308) is a post-tax NPV8 of $341 million (representing an IRR 19.2%) with a LOM of 22.25 years that management plans to expand to 30 years with additional exploration.

Having completed the DFS, work on the Front End Engineering Design (FEED) has commenced and is expected to take approximately six months to complete. Management expects an updated MRE will be completed during the later part of the third quarter of 2023.

A Final Investment Decision (FID) decision expected in 2H of FY2024. Management anticipates the development/construction of a mine in the 2024/25 timeframe.

The Project Mining License Application (MLA237) was filed with the Namibian Ministry of Mines and Energy (MME) in July 2021 and subsequently conditionally approved for grant subject to obtaining an Environmental Clearance Certificate (ECC). The Environmental Impact Assessment (EIA) for the Tumas Project area was submitted to the Ministry of Environment, Forestry and Tourism (MEFT) on April 5, 2023. Management anticipates the approval process of three to four months indicating that MLA237 will be granted in mid-2023.

On March 28, 2023, Phase 1 of a two-phase 340-hole (9,500m) RC resource drilling program commenced at Tumas 3 in order to expand the current resource base to increase the LOM of the Tumas Project to over 30 years. The drill program started at the western end of Tumas 3 and will extend to Tumas Central in order to defined the uranium mineralization. Phase 2 will focus on infill drilling at the newly delineated mineralized zones.

Mulga Rock Project (Western Australia)

The Mulga Rock Project is comprised of four polymetallic deposits (Ambassador & Princess in the east and Shogun & Emperor in the west). Deep Yellow is pursuing an enhancement program to increase the project’s value expanding by the scope to include not only uranium, but also polymetallic (copper, nickel, cobalt, zinc) and rare earth minerals (neodymium and praseodymium). These minerals are known to be present within the identified resource shells. By expanding the resource work, while still remaining within the approved pit boundaries, Deep Yellow is seeking to add supplementary value to the Mulga Rock Project.

Having completed a 63-hole (4,099m) geo-metallurgical air-core drill program in December 2022, an 810-hole (50,000m) air-core drilling program on the east deposits commenced in late-March 2023 in order to support a revised DFS that includes battery metals. The current MRE contains 71.2Mt of ore at 570ppm U308 for 90.1Mlb U308. The air-core drilling program is estimated to conclude in 3Q of 2023.

On March 29, 2023, Deep Yellow commenced an 810-hole (50,000m) air-core drilling program commenced at the Ambassador and Princess deposits at Mulga Rock with the goal of better defining and upgrading the uranium resource, along with delineating non-uranium minerals within the uranium resource shell. This drilling program is expected to be completed in 3Q 2023. Drill results will contribute to an updated MRE regarding the uranium resource estimate (both in terms of size and upgrade to Indicated category status), pit optimization and the addition of battery and rare earth metals. The center of the Ambassador East deposit is being particularly targeted with 440 holes (27,000m) with 5m by 5m spacing within a 100m by 100m square. Also, the drilling results are expected to help support a revised DFS.

Production Profile of Two Most Advanced Uranium Projects (Tumas & Mulga Rock)

With the its two most advanced uranium projects (Tumas & Mulga Rock), Deep Yellow projects the company’s production profile in its latest presentation. Management is motivated and determined to develop and construct operating uranium mines with capacity to produce over 10 million pounds of U308 annually.

Omahola Basement Project (Namibia)

The Omahola Basement Project is situated within the prospective Alaskite Alley corridor, in which Rössing and Husab uranium deposits are located. The Omahola Project is comprised of three deposits: Ongolo, MS7 and Inca. The current Mineral Resource Estimate at the Omahola Project (Ongolo, MS& & Inca deposits) is 125.3Mlb at 190ppm U308 at 100ppm cut-off JORC (2012), which in 2021 was upgraded from 45Mlb at 420ppm eU308 at a cut-off of 250ppm JORC (2004).

During 2022, Deep Yellow completed a 10,000m follow-up RC drill program in two Phases, which was composed of 118-hole (10,181m). Three new prospective areas were identified:

• thick, uranium-mineralized alaskites situated 2km north of Inca and west of MS7 (which extended the fertile zones by 2km),were intersected by drillholes OMH0298 & OMH0299

• Drill hole OMH0309 in a distinct magnetic anomaly detected a southwestern extension of Ongolo South

• multiple uranium intersections by drill holes OMH0254 & OMH0255 at Inca South

Management plans for deeper RC drilling in the highly prospective area located 2km north of Inca and west of MS7 targets where thick, stacked mineralized alaskites were intersected.

Alligator River Project (Northern Territory)

The Alligator River Project encompasses three groups of tenements: Wellington Range King River (granted), Algodo Beatrice (application) and Mt Gilruth (application). The major exploration target within the Wellington Range King River group is Angularli.

Between June 28 and October 22, 2022, Deep Yellow completed an 18-hole (6,339m) diamond drilling program at Angularli deposit (part of the Alligator River Project) in order to support a Mineral Resource update. The mineralized drill cores were cut and 1,116 samples were collected for assays. In addition, 101 bulk density readings were taken.

On May 1, 2023, Deep Yellow announced the assay results for 18-hole program. These results, along with bulk density sample analyses, will help support a revised MRE, which is expected to be completed during Q2 2023. The primary focus of the broadly-spaced extensional drillhole program was to identify up-dip extensions of the sandstone-hosted uranium mineralization associated with the Inferred MRE, which was successfully accomplished, along with detecting a continuity of mineralization down-plunge. Furthermore, the mineralized system was found to extend along strike toward the north.

The maiden Mineral Resource Estimate for the Angularli deposit was completed in March 2018 with an Inferred Resource Estimate totaling 0.91Mt at 1.29% U308 for 25.9Mlb U308. The maiden MRE was supported by 30 diamond drill holes.

Aussinanis Project (Namibia)

The Aussinanis Project is located approximately 40 km south of the Tumas 3 deposit and is held by the Yellow Dune JV, of which Deep Yellow owns 85%. In late-March 2023, the MRE of the Aussinanis Project was upgraded to JORC (2012), which uses a 100ppm cut-off. The updated Indicated & Inferred Resource base is now 28.1Mlb at 171ppm U308 versus the prior 18Mlb at 237ppm U308 150ppm cut-off JORC (2004).

Nova JV (Namibia)

In late-March 2017, Deep Yellow entered into a joint venture agreement with JOGMEC (Japan Oil, Gas and Metal National Corporation) regarding the Nova Joint Venture (or Nova JV). In August 2020, JOGMEC earned a 39.5% interest in the project through exploration and development expenditures of AUD$4.5 million. Nova Energy (a subsidiary of Toro Energy Ltd holds 15% and Sixzone Investments Pty holds a 6% carried interest. The NOVA JV encompasses 556.8 square kilometers. Deep Yellow continues to be the manager of the NOVA JV holding 39.5% interest in the project.

Results from recent 14-hole follow-up RC drilling program indicate that the highly prospective area of high grade and thick uranium mineralization at Barking Gecko appears to continue at depth to the northeast. However, drilling results at the Barking Gecko East, Turtle’s Neck and Iguana prospects did not support further exploration at this time.

DETAILS OF RECENT EVENTS

Aussinanis Project (Namibia)

On March 31, 2023, Deep Yellow announced the upgrade of the MRE on the Aussinanis Project to JORC (2012) from JORC (2004). The updated MRE contains an Indicated & Inferred Resource of 28.1Mlbat 171ppm U308 reported at a 100ppm cut-off versus the prior 18Mlb at 237ppm U308 at a 150ppm cut-off. The updated JORC (2012) MRE contains 74Mt of ore at 171ppm U308.

The upgrade was based on a review of the existing data on the Aussinanis paleo-drainage system and calcrete-related uranium deposits, which was based on 3,999 vertical RC holes(44,071m) drilled between March and November 2008. The majority of the resource area was drilled with approximate 200m by 200m spacing (classified as Inferred) and certain areas of infill drilling on spacing of 50m by 50m spacing (classified as Indicated).

When the previous MRE was completed, the cut-off grade for uranium deposits was set at 150ppm U308 by JORC (2004); however, based on recent feasibility studies of similar deposits in the Tumas area, it was decided that a MRE at a 100ppm U308 cut-off is more appropriate than the historically used 150ppm U3O8 cut off. Now the cut-off used in the MRE of the Aussinanis Project conforms with the 100ppm cut-off applied for the Tumas Project to the north. The grade reduction resulted in a 56% increase in contained metal.

Located in MDRL3498 approximately 40 km south of the Tumas 3 deposit in Namibia, the Aussinanis Project is held in the Yellow Dune Joint Venture (Deep Yellow - 85%, Epangelo Mining Company Ltd -5% and Oponona Investments Ltd – 10%).

Nova Joint Venture Project (Namibia)

On February 21, 2023, the follow-up drill program, which commenced in November 2022 at the Nova JV, was completed. The program consisted of 14 RC holes (1,597m) and focused on exploring a cluster of prospective areas consisting of Barking Gecko North, Barking Gecko East, Iguana and Turtle’s Neck.

Drilling results indicate that the highly prospective area of high grade and thick uranium mineralization at Barking Gecko appears to continue at depth to the northeast; however, follow-up RC drilling did not identify any extension to Barking Gecko East. Also, either low-grade mineralization or no mineralization was intersected at the Turtle’s Neck and Iguana prospects

VALUATION

Broadly speaking, the public uranium companies can be grouped into three segments: producers, development companies and exploration companies. Producers are actively mining and generating revenues. Exploration companies are prospecting and/or drilling to establish mineral resources. In between these two segments are the development companies that already have established resources and are advancing through the process to bring a mine in operation, generally from the point of initiating a Pre-Feasibility Study to the actual construction of a mine. The comparable companies to Deep Yellow fall into this category.

Further, the comparable companies have been narrowed through quantitative factors, particularly those with a market capitalization over $200 million and trading above $0.50 per share. This process captures a range of well-funded junior uranium development companies, which are listed in the table above. Currently, the P/B valuation range of these comparable companies is between 2.14 and 7.22. With the expectation that Deep Yellow’s stock will attain a mid-second quartile P/B ratio of 5.0, our comparable analysis valuation price target is US$1.75.

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