By Steven Ralston, CFA

OTCQX:DYLLF | ASX:DYL

READ THE FULL DYLLF RESEARCH REPORT

SUMMARY OF RECENT EVENTS

• Definitive Feasibility Study (DFS) on Tumas Project completed, optimized & released.

o Economics:

• post-tax NPV8 $341 million (19.2% IRR) @ US$65/lb. U308

• 4.1 year payback; total operating costs at $39.39/lb.U308

o Project Mining License Application (MLA237) on-track to be granted in mid-2023

• Exploration update for Omahola Basement Project

o Two-stage 118 hole (10,181m) follow-up RC drilling program completed in late 2022

o Three (3) new target areas identified

▪ new prospective area north of Inca and west of MS7 extends fertile zones by 2km. Management plans to RC drill the area in 2023

▪ southwestern extension of Ongolo South detected by drill hole OMH0309

▪ multiple uranium intersections at Inca South

• Update for Mulga Rock Project

o 1.15% royalty purchased for 19,444,444 shares (valued at AUS$14 million) in order capture supplementary value for the Mulga Rock Project

o enhancement program progressing through drilling programs & metallurgical work in order to enhance project’s value by considering polymetallic and rare earth minerals.

• Exploration update for Alligator River Project

o Sampling and density determinations completed

o An updated resource estimate for the Angularli deposit in expected during Q2 2023

Executive Summaries of Project Updates

Tumas Project (Namibia)

The DFS on Tumas Project was completed in late November 2022 and the optimized & finalized DFS was released on February 2, 2023. The completion of the DFS is highly significant for Deep Yellow (OTCQX:DYLLF) (ASX:DYL) in that if confirms that management is motivated and determined to develop and construct operating uranium mines with capacity to produce over 10 million pounds of U308 annually. Importantly, the project’s risk is mitigated by being in a favorable mining jurisdiction where management has previously developed an extremely similar project (the Langer Heinrich mine) in the past.



Despite inflationary pressures, the project remains commercially attractive. Highlights under a base case of U308 @ US$65/lb. include a LOM of 22.25 years, payback of $385 million of initial capital costs in 4.1 years and a post-tax NPV8 of $341 million, which represents an IRR 19.2%. Annual production is expected to be 3.6 Mlb U308with credits for vanadium (specifically V2O5 aka red cake).

There are significant changes relative to the PFS update released in October 2021, namely,

• the production capacity of the processing plant expands by 20% from 3.0 to 3.6 Mlbpa

• process throughput increases from 3.75 to 4.15 Mtpa

• Vanadium production increases to 1.15Mlbpa

• the initial start-up capital increases $385 from $295 million, primarily due to inflationary pressures

Also, there are two highly significant variables that can drive upward revisions to the assessments in the PFS: the price of uranium and the confirmation of additional uranium resources at the Tumas Project.

Pricing: Forecasts based on the looming supply deficit under the World Nuclear Association (WNA) scenario are in the $70-$80/lb. range. Specifically, under TradeTech’s Forward Availability Model 2 (restricted supply scenario) with a mid-point pricing forecast of US$77/lb. U308, the Tumas Project’s post-tax NPV increases 80% to US$614M resulting in an IRR of 26.4%.

Resource/Reserve Expansion: It should be noted that 40% of the prospective paleochannels at Tumas has yet to be tested. In addition, the current 49.5 Mlb. Inferred Resourcehas the potential to be upgraded. Management believes that Tumas has the realistic potential to increase the LOM to over 30 years through the discovery of additional mineable resources.

Management hosted a webcast and posted an updated corporate presentation to better inform investors about the DFS. More details are discussed in the Tumas Project Update section below.

Deep Yellow’s Board has authorized management to advance the Tumas Project’s front-end engineering & design (FEED), which is expected to be completed during the second half of 2023. Also, management will pursue the project’s financing as well as enter into off-take discussions. Management anticipates that the Final Investment Decision on the Tumas Project to be made in the first half of 2024.

A marketing and sales strategy is currently being prepared to help support the financing of the Tumas Project. In order to optimize the value of Tumas, long-term sales commitments to global Tier 1 nuclear utilities will be emphasized.

Work continues on the Environmental Impact Assessment (EIA) for the Tumas Project area. The Project Mining License Application (MLA237) was filed with the Namibian Ministry of Mines and Energy (MME) in July 2021. All the EIA’s baseline and impact studies have been completed. After undergoing an internal review, management expects to submit the project’s final EIA to the Ministry of Environment, Forestry and Tourism (MEFT) in late February 2023. Thereafter, management anticipates that MLA237 will be granted in mid-2023. An updated resource estimate is expected in the third quarter of 2023.

Omahola Basement Project (Namibia)

Situated on EPL3496 within the prospective Alaskite Alley corridor, currently the project consists of three basement deposits (Ongolo, MS7 & Inca), on which an MRE includes Measured, Indicated and Inferred Resources totaling 125.3Mlb at 190ppm U308 (100ppm U308 cut-off).

The first stage of the Phase 2 drill program of a two-stage follow-up RC drilling program at the Omahola Project commenced on March 7th 2022 and was completed in July. This first stage was comprised of 40 holes (5,252m) and focused on targets identified by the 2021 shallow drill program.

In late December 2022, Deep Yellow completed the second stage of the Phase 2 follow-up RC drilling program. The second stage commenced in September 2022 and was completed by mid-November 2022. The second stage was comprised of 78 holes (4,929m).

The total follow-up 118 hole (10,181m) drilling program identified three prospective areas:

• 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 2023 in the highly prospective area located 2km north of Inca and west of MS7 targets where thick, stacked mineralized alaskites were intersected.

Mulga Rock Project (Western Australia)

In late December 2022, Deep Yellow purchased the 1.15% royalty on the Mulga Rock Project held by Resource Capital Fund VI LP in consideration of 19,444,444 shares of Deep Yellow. The elimination of this legacy royalty will enhance the project’s potential value going forward.

Deep Yellow is pursuing an enhancement program to increase the project’s value by expanding its scope to include both polymetallic and rare earth minerals, including copper, nickel, cobalt, zinc, 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 late 2022, management is planning on a 600-to-800-hole air-core drilling program in order to further ascertain the distribution of polymetallic and critical minerals, along with better defining the uranium resource and potentially upgrading resource classifications. This second air-core drilling program is planned to commence in March 2023.

In February, 2023, the Commonwealth Department of Climate Change, Energy, the Environment and Water approved the Mulga Rock Project’s Sandhill Dunnart Conservation Plan. The approval allows Deep Yellow to build an operational airstrip at Mulga Rock.

Alligator River Project (Northern Territory)

The 18-hole (6,339m) diamond drill program conducted between late June and October 2022 provided 1,116 samples for assays. Drill cores analyzed in the field by portable XRF devices indicate that the uranium mineralization extends up-dip position from the Mineral Resource domain and along strike to the north. Analysis on select core samples and on select bulk density samples will help support an updated MRE, which management anticipates being completed during the second quarter of 2023. The current Inferred Resource estimate totals 0.91Mt at 1.29% U308 for 25.9 Mlb. U308.

TUMAS PROJECT - DEFINITIVE FEASIBILITY STUDY (DFS)

In early February 2023, the finalized DFS on the Tumas Uranium Project was released by management. Since its completion in November, the development, pre-production and schedules were further optimized.

The DFS is based on an open cut and shovel mining scenario (using contract mining) and a conventional beneficiation/leaching recovery method. With a projected annual treatment throughput of 4.15 Mt and a U308 recovery rate of 93.3%, the average annual production is estimated to be 3.6 Mlb U308 (aka yellow cake) and 1.15 Mlb vanadium by-product (vanadium pentoxide aka V2O5) over a 22.25-year Life of Mine (LOM). The assumed base case mineral prices are US$65.00 per pound U308 and US$8.90 per pound of vanadium.

At the assumed base case mineral prices, an after-tax NPV8 of $341 million (based on an 8% discount rate) is indicated, generating an after-tax IRR of 19.2%. The initial pre-production capital costs total $385 million with an anticipated payback of 4.1 years once production commences. The direct operating cost (C1) per pound of yellow cake is projected to be $34.68 per pound including a vanadium credit of $2.54/lb. Brook Hunt C1 cash costs include mining and processing (labor, power, reagents, materials) costs plus local G&A, freight and selling costs.

Deep Yellow will manage the processing plant and provide the general administration services while a contract miner will conduct the mining operations.

Processing Circuit

Significant efficiencies were achieved in the processing circuit. Less material will need to be processed since the beneficiation process is expected to reject about 55% of ROM mass compared to approximately 35% at Langer Heinrich. As a result, utility costs decrease by reducing the consumption of power and water. The leaching system has been optimized by introducing steam heat. Also, the ultrafiltration and nanofiltration will help concentrate the pregnant leach solution, which will improve recoveries.

Plant Layout

The plant layout was designed to minimizing pumping distances, particularly for high volume processes, as well as using gravity flow when possible.

Mine Production Schedule

The image below displays the year-by-year schedule for processing uranium ore, along with the grade being processed. The operational schedule maintains a steady annual production of 3.6Mlb U308 for 10 years with declining uranium production thereafter due lower ore grades. Management anticipates bolstering the production in the latter years through upgrading the remaining Inferred Resource, along with exploration of the remaining 40% of Tumas paleochannel that has yet to be tested.

Tumas Project - Reserve

The Ore Reserve estimate of the Tumas Project remains unchanged from the updated PFS Reserve released in early October 2021. However, the financial model of the DFS utilizes a marginally higher tonnage than the ore reserve tonnage due to the estimation that an additional 2.2 Mt of low-grade material will be processed. None of the Inferred Mineral Resources were included in the Ore Reserve estimation or production schedules, and as such were treated as waste material.

Definitive Feasibility Study Primer

A Definitive Feasibility Study is potentially bankable in that it is prepared with a sufficient high level of detail and at a greater level of integrity than a PFS such that a company can secure financing for a project from investors and/or lenders, thus better enabling the project to proceed. The detailed work includes, but is not limited to:

• detailed mine plan including the method to be employed, mine design, surface layout, mining schedule, approach to material movement, stockpile requirements, management of lower grade ore etc.

• formal engineering work of processing plant with a complete plant layout design, mill feed rate, tailings management process etc.

• specific energy requirements

• comprehensive metallurgical studies

• optimization studies on both mining and ore processing

• tailings management, including overall design, technical geochemical test work, storage facilities etc.

• real world pricing (based on quotes) for infrastructure (both mining & processing), utilities (energy and water) and contract mining (if required)

• rehabilitation of the areas mined

• environmental work on the operations in both mining and ore processing

• and, of course, the project’s economics

Also, a DFS is often based on Proven and Probable Reserves, but at least on Indicated and Measured MREs.

In general, the projected economics in Definitive Feasibility Studyare usually accurate to within 10%-15%. In contrast, the accuracy of preceding studies, specifically Scoping Studies and Preliminary Feasibility Studies, are in the range of 40%-50% and 20%-30%, respectively.

To better exemplify the difference of comprehensiveness between a PFS and a DFS, below are imagescontrasting the level of detail of the geological analysis of the mineable ore at the Tumas 3 deposit and of the design & function of the processing plant at Tumas.

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 2.4 and 6.9. With the expectation that Deep Yellow’s stock will attain a first quartile P/B ratio of 6.9, our comparable analysis valuation price target is US$0.98.

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