ARMZ Strategic Investment in Uranium One Inc. by ARMZ ARMZ

ARMZ Strategic Investment in Uranium One Inc. July 2010

Important information

Cautionary Statement No stock exchange, securities commission or other regulatory authority has approved or disapproved the information contained in this Presentation. Readers of this Presentation are advised to refer to independent technical reports containing detailed information with respect to the material properties of Uranium One. These technical reports are available under the profiles of Uranium One Inc., UrAsia Energy Ltd., and Energy Metals Corporation at www.sedar.com. Those technical reports provide the date of each resource or reserve estimate, details of the key assumptions, methods and parameters used in the estimates, details of quality and grade or quality of each resource or reserve and a general discussion of the extent to which the estimate may be materially affected by any known environmental, permitting, legal, taxation, socio-political, marketing, or other relevant issues. The technical reports also provide information with respect to data verification in the estimation. Readers are also cautioned to review the information circular of Uranium One that will be produced in connection with the transaction for full details of the terms and conditions of the transaction between Uranium One and ARMZ. This document may use the terms "measured", "indicated" and "inferred" resources as defined in accordance with National Instrument 43-101 - Standards of Disclosure for Mineral Projects. United States persons are advised that while these terms are recognized and required by Canadian regulations, the SEC does not recognize them. Readers are cautioned not to assume that all or any part of the mineral deposits in these categories will ever be converted into reserves. In addition, "inferred resources" have a great amount of uncertainty as to their existence and economic and legal feasibility and it cannot be assumed that all or any part of an inferred mineral resource will be ever be upgraded to a higher category. Readers are cautioned not to assume that all or any part of an inferred resource exists or is economically or legally mineable. Mineral resources are not mineral reserves and do not have demonstrated economic viability. Scientific and technical information contained herein regarding Uranium One has been reviewed on behalf of Uranium One by Mr. M.H.G. Heyns, Pr.Sci.Nat. (SACNASP), MSAIMM, MGSSA, Senior Vice President of Uranium One Inc., a Qualified Person for the purposes of NI 43-101. Scientific and technical information contained herein has been reviewed on behalf of ARMZ, Rosatom or Effective Energy N.V. (a wholly owned subsidiary of ARMZ) by Wayne W. Valliant, P.Geo. and John I. Kyle, P.E. of Scott Wilson RPA Inc. – both Qualified Persons for the purpose of NI 43-101. Certain statements in this Presentation have been derived from third party sources, and are used by consent or are otherwise publicly available. None or ARMZ, Rosatom or Uranium One take responsibility for such statements. Forward-Looking Statements This Presentation contains certain forward-looking statements. Forward-looking statements include but are not limited to those with respect to the future price of uranium, the estimation of mineral resources and reserves, future development and merger & acquisition activities of ARMZ and Rosatom, the realization of mineral reserve estimates, the timing and amount of estimated future production, costs of production, capital expenditures, costs and timing of the development of new deposits, future supply and demand differentials for uranium, success of exploration activities, permitting time lines, currency fluctuations, requirements for additional capital, government regulation of mining operations, environmental risks, unanticipated reclamation expenses, title disputes or claims and limitations on insurance coverage and the timing and possible outcome of pending litigation. Forward-looking statements also include statements with respect to the completion of the sale of the Akbastau and Zarechnoye interests to Uranium One. In certain cases, forward-looking statements can be identified by the use of words such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes” or variations of such words and phrases, or state that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of ARMZ, Rosatom, or Uranium One to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such risks and uncertainties include, among others, the completion of the transaction described in this Presentation, the actual results of current exploration activities, conclusions of economic evaluations, inability to obtain required governmental approvals for future merger & acquisition activities, changes in project parameters as plans continue to be refined, possible variations in grade and ore densities or recovery rates, failure of plant, equipment or processes to operate as anticipated, accidents, labour disputes or other risks of the mining industry, delays in obtaining government approvals or financing or in completion of development or construction activities, risks relating to the integration of acquisitions, the risk of operating in foreign jurisdictions, as well as those factors referred to in the section entitled “Risk Factors” in Uranium One’s Annual Information Form for the year ended December 31, 2009, which is available on SEDAR at www.sedar.com, and which should be reviewed in conjunction with this document. Although this Presentation has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. ARMZ, Rosatam and Uranium One expressly disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except in accordance with applicable securities laws.

Rosatom - global leader in nuclear industry

ARMZ, Uranium mining

• Uranium mining and supply • World’s #5 in uranium production

Electricity generation

• World’s #2 in installed capacity

Uranium conversion and enrichment

• 40% of world’s uranium enrichment

(23.2GW)

• Operates 32 reactor cores across 10

capacity

• Enrichment and supply of uranium to the

power stations

US, Europe, Asia, and other countries

• Further 7 power stations in construction

Rosatom Rosatom is a fully diversified corporation, with operations ranging from uranium mining to NPP construction, power generation, and sales

Nuclear fuel fabrication and supply

• Supplies NPPs in Russia and 76 other NPPs across 14 countries (17% market share)

• Annual export volume in excess of $1bn

NPP construction

• Holds 16% market share in terms of nuclear power plant construction worldwide

NPP’s Engineering and equipment supply

• Supplies equipment and services to the power generation and Oil & Gas sectors

• Supplies equipment to over 20 countries

Rosatom - innovative producer and most reliable supplier • • •

No disruption in supply since exports began in 1968 300 M lbs U3O8 equivalent delivered to the USA to date under HEULEU contract since 1995 As of 1995, around 50% of nuclear energy in the USA has been generated using LEU produced from HEU

•

10% of US electricity is generated using fuel supplied by Rosatom

•

US$18 bn worth of orders on hand in 17 countries

1973 World’s first NPP with fast neutron reactor

1989 Start of EUP supply to the US market

2001 The first post-Soviet power unit brought into operation

1954-55 Soviet Nuclear Power Program established

1993 US and Russia signed Megatons to Megawatts Deal

1945 Russian nuclear industry creation

World’s first NPP put into operation in USSR

1940s

1950s

2007 The Ministry transformed into ROSATOM corporation

1959 World’s first nuclear powered icebreaker launched

1960s

1968 Starting Uranium enrichment export sales

1990s

2000s

Global nuclear power reactor new builds fuel growth in demand for uranium

439 reactors in operation and 55 under construction worldwide Number of Nuclear Power Reactors

Global Nuclear Power Reactor New Builds Proposed Ordered or Planned Under Construction

Jan-2007

Jan-2008

Jan-2009

Jan-2010

June-2010

Source: WNA, June 2010

Nuclear Reactor New Build by country (top eight countries)

5 Source: WNA, June 2010

Rosatom’s strategy and primary focus NPP construction abroad

Rosatom Byelorussia Germany Czech Republic Ukraine Kazakhstan Hungary Slovenia Bulgaria Portugal Armenia Turkey Jordan Iran Belgium

Croatia

Serbia

Georgia

Albania

Armenia

Cyprus

China

Israel Jordan

Libya

Egypt

Kuwait

Qatar

Taiwan

India Vietnam

Gambia Guinea-Bissau

Vietnam Philippines

Dschibuti

Sri Lanka

Rosatom holds 16% current market share in NPP construction worldwide

Brunei

Togo

Malaysia

Active units worldwide Nuclear power plants NPP Constructed – 31 units

ROSATOM

Under construction – 5 units

3rd worldwide by active units

Decision’s been made – 29 units Negotiations – 16 units

units Source: Company reports

…and an opportunity for ARMZ to capitalize on Rosatom’s domestic uranium requirements met by ARMZ mines in Russia with total capacity of over 5 thou tU (13 M lb U3O8) p.a.

Global partners

TOSHIBA

ALSTOM

SIEMENS

Rosatom ARMZ Belgium

• Guarantee of long-term stable uranium delivery over nuclear reactor life • Globally diversified U3O8 sources • Market-related pricing • Decreasing operational risks • Effective logistics Portugal

U3O8

Croatia

Serbia

Georgia Albania

Armenia

Cyprus Israel Jordan Kuwait

Haiti

Belize

Gambia Guinea-Bissau

French-Guayana

Rosatom’s NPP construction customer

Qatar

Taiwan

Vietnam

Dschibuti

Sri Lanka

Philippines

Brunei

Togo

Malaysia

Uranium mines ARMZ’s uranium mines

ARMZ’s strategy – diversify portfolio by low risk and long-term uranium projects

Positioning ARMZ plus U1 relative to peers by YE2010 (est.)

ARMZ - Uranium One strategic alliance will be one of the leading global uranium producers It ranks second in production volume by 2015 (32.3 M lbs U3O2 â&#x20AC;&#x201C; 12.4 thou tU)

40 35

2015 Uranium Production, M lbs U3O2 (on attributable basis) 33,8

2009 Uranium Production, M lbs U3O2 (on attributable basis) 21,4

32,3

20,8

29,9 30

16,7 15,7

25,0 25

14,1

22,1

20 10

15 9,0

3,1

5 0

0 Kazatomprom

ARMZ plus Uranium One

Areva

Sources: Company reports, Ux Consulting

Cameco

Rio Tinto

Paladin

Kazatomprom

Cameco

Areva

ARMZ plus Uranium One

Rio Tinto

Paladin

Sources: Company reports, Ux Consulting

Uranium One - the Best Opportunity for ARMZ

Uranium One is best positioned to serve as cornerstone of ARMZ diversification strategy:

A win-win

•

Best in class assets with lowest cash cost

•

Significant growth prospects

•

Increased diversification (assets on 3 continents: America, Asia, and Australia)

•

High standards of corporate governance

•

Best in class management team (bringing mines into operation, significant experience in M&A)

•

Track record and high profile among the sector’s public companies 9

ARMZ & Uranium One: established and reputable partnership Synergy and value creation through organic growth and further M&A deals •

•

ARMZ already an existing shareholder • U1 and ARMZ agreed 6-month exclusivity arrangements re. negotiations in connection with the sale of the Akbastau Assets to U1 Established and trusted Board level relationships

•

Similar strategy, vision, and investment philosophies

•

Significant implementation experience from the previous deal (structuring, regulatory approvals, etc.)

•

Q4, 2010

Uranium One is ARMZ’s international growth platform

Second U1 deal expected to close

Jun 08, 2010

Dec 15, 2009

Second U1 deal announced Jun 14, 2009 Jul, 2008

First U1 Deal Closed Start of negotiations First U1 deal announced

ARMZ’s existing stake highlights its commitment to Uranium One as a long-term strategic partner.

ARMZ interests in accretive M&A deals and Uranium One market capitalization growth

• Management team and Board with extensive public company experience

TSX share price of

Accretive deals

ARMZ investment

Dilutive deals

• Uranium One is a public platform for the mutual growth strategy through M&A • Position as public company means Uranium One share price performance is a direct indicator of appreciation by the market of the company’s management efficiency and M&A effectiveness • ARMZ vested financial and strategic interest in Uranium One places great importance on selection criteria for potential M&A activity – leading to the execution solely of accretive transactions that would be regarded favorably by the market

Long-standing friendly historical and political ties between Russia (Rosatom) and Kazakhstan (Kazatomprom)

Government to Government Relations

Russia and Kazakhstan share 6,846 km of land border

Russia and Kazakhstan are currently parties to a customs union to be transformed into a common economic space in the near future

Russia and Kazakhstan hold membership in a number of international organizations including the Organization for Security and Co-operation in Europe (OSCE), Commonwealth of Independent States (CIS), and the Shanghai Cooperation Organization (SCO).

Russia’s and Kazakhstan’s leaders meet each other on a regular basis.

Relations in Nuclear Sphere

Comprehensive Program of Russia-Kazakhstan Cooperation in the field of peaceful use of atomic energy signed 07-Dec-2006 and successfully implemented

Roadmap of Additional Measures pursuing the implementation of the Comprehensive Program signed 20-Nov-2009

Memorandum on integration and cooperation in the field of peaceful use of atomic energy signed 05-Jul-2010

Rosatom

Kazatomprom

Kazatomprom buying a stake in UEIP (Russia’s largest uranium enrichment plant) Joint venture for uranium enrichment Joint venture for NPP engineering

Joint ventures for uranium mining

Uranium One minority protection

Uranium One minority shareholders have several strong levels of protection

Canadian law, inc. NI62-101, 62-102, 62-103

18 months standstill, coat-tail Independent Board of Directors Current western style management

U1 minority shareholders

... and multiple sources of potential upside

• Remove market discount caused by perceived Kazakhstan political risk Company re-rating

• Increase awareness of UK, Europe-based investors familiar with the CIS region • Potential for London listing • Benefits from Kazakhstan’s EPT (Extra Profit Tax) payments exemption

Improve understanding of important value drivers

• Higher factual U1 resource base than reflected in NI43-101 reports given different resource classification system in Russia • Dynamic mine development and production growth • Strong expected uranium price growth in mid- and long-term

U3O8 price upside

• U1 maintains full exposure to uranium prices as 70-80% of the contract base is priced at spot on delivery •Synergies through shared infrastructure and refining capacity, as well as savings from CAPEX and accelerated ramp-up to stable state production

Synergy effects

• Convenient location of the Akbastau and Zarechnoye mines makes them highly complementary with existing Uranium One assets • Know-how and technology sharing

Summary transaction structure

• Current shareholders

•

$1.06 /share1

• • • •

50% of Akbastau mine (Kazakhstan) 49.67% of Zarechnoe mine (Kazakhstan) US$610 M

• •

356 M shares

In case JUMI debentures remain outstanding or is converted into shares, payment per share will reach US$1.43/share

•

Uranium One shareholders get: ~57% premium to share price of C$2.53, paid in cash dividend Increased enterprise value through interest in two high quality assets in Kazakhstan Strong corporate governance, with majority independent Board Rosatom gets: Uranium One re-rating prospects and significant growth in it’s market capitalization Public company with TSX and JSE listings and high standards of corporate governance

ARMZ is market orientated as value-creation is critical to Rosatom

Corporate governance is key to ARMZ • Initiative driven by Rosatom • ARMZ aspires to be a global company - as such, it is committed to compliance with the best business practices ARMZ strategy is focused on market-driven growth • Global mining company centered on uranium as strategically attractive market • Focused on shareholder value creation • Disciplined approach to M&A and investment, embedded long-term optionally in greenfield and brownfield projects portfolio • Better service for clients ARMZ is aware of importance of its long-term market position • Controlling a share of reserves sufficient to secure optimal cost-curve position • Applying cost-managing technologies and operational excellence • Providing value-adding solutions to our clients • Ensuring long-term security of supplies Availability of capital to finance growth and investment • Rosatom has invested over US$2bn in ARMZ as it believes uranium mining to be one of the key value growth platforms within the nuclear industry 16

ARMZ Strategy in Diversification

•

ARMZ is a sophisticated financial investor with access to stable government sources of financing for its development and diversification strategy

•

Potential investment projects must meet certain criteria for ARMZ to get access to financing, which include, inter alia:

•

Near-term production (non-greenfield)

Low cash cost of production relative to industry

DCF-based valuation and acquisition structure

Uranium One is ARMZ’s important partner in M&A activity and its global growth platform. ARMZ will propose to allow U1’s participation in a transaction involving investment in uranium exploration assets or any form of joint ventures to develop or operate uranium exploration assets outside of the Russian Federation

Minorities U1

All opportunities outside of Russia

ARMZ criteria for M&A

Rosatom

$ ARMZ

Russian assets

- Near-Term Production - Low Cash Cost

- DCF-based valuation

Intergovernmental programs (i.e. Armenia, Mongolia)

ARMZ is led by a strong and experienced management team

Mr. Sergei Kirienko, Chairman of Rosatom • • • • • • • • •

Graduated from the Institute of Naval Engineers in Gorky and the Academy of National Economy of the Government of the Russian Federation majoring in Finance and Banking 2007 – Present, Chairman of Rosatom State Corporation 2005 – 2007, Head of the Federal Atomic Energy Agency 2001 – Present, Chairman of the State Committee for Chemical Disarmament 1998, Served as Prime Minister of the Russian Federation 1997, Appointed Minister for Fuel and Power Industry 1996-1997, President of NorSea Oil Company 1994-Present, Member of President’s Council on Industrial policy and entrepreneurial business 1993-1996, Chairman of the Board, Garantiya Bank

Mr. Vadim Zhivov, Director General, CEO • Graduated from the Moscow Power Institute (College of Physics Engineers) • 1985 to 2003 - held various positions in government bodies and business entities • 2003 - appointed Deputy Director General for Corporate Development of GaspromMedia. • 2004 to 2006 - Vice President, Capitel Corporation • 2006 to August 2007 - Deputy Director General of TENEX • August 2007 - First Deputy Director General, ARMZ Uranium Holding Co. • November 2007 - Director General, ARMZ Uranium Holding Co. • Development, structuring, and management of Russian and international projects in energy and nuclear machine-building, natural uranium production, mass communications, development and structuring of international corporations are among Vadim Zhivov’s core competencies.

Strong operating and financial performance ARMZ 2009 IFRS statements Income Statement

Balance Sheet

US$m

Assets

31-Dec-2009

31-Dec-2009 31-Dec-2008

31-Dec-2008

Cash and Equivalents Debtors Reserves and Other Total ST Assets

1,619.7 279.7 237.5 2,136.9

98.2 127.1 333.2 558.6

Sales Cost of Sales SG&A Operating Profit

916.1 (520.1) (122.2) 273.9

613.1 (405.6) (101.4) 106.1

PP&E Other LT Assets Total LT Assets

557.4 641.7 1,199.1

564.6 106.0 670.5

Total Assets

3,336.0

1,229.1

Financial Expenses Gain from sale of invesments FX and other income / (loss) Profit before Tax Tax expense Net Profit

(80.4) 84.4 42.8 320.7 (109.8) 210.8

(37.4) 0.0 (56.8) 11.9 (0.2) 11.7

Short Term Debt Creditors Other Total ST Liabilities

234.1 94.5 77.9 406.5

421.8 61.4 22.4 505.6

211.3 (0.5) (34.1) 176.8

11.2 0.4 0.9 12.6

Long Term Debt Other Total LT Liabilities

295.0 63.6 358.5

121.5 84.2 205.8

Total Liabilities

765.0

711.4

Liabilities

Equity Shareholders Equity Additional Paid in Capital Retained Earnings Other Minorities Total Equity

630.8 1,505.1 200.7 176.3 58.1 2,570.9

159.6 0.0 22.4 272.2 63.6 517.8

Total Liabilities and Equity

3,336.0

1,229.1

Attributable to ARMZ Shareholders Minorities FX adjustments Net Income

•

Revenues increased by 49% against 2008

•

Operating profit increased by 115%

•

Net income increased by 1,306%

•

Over US$1.5bn additional cash on balance

•

Total Assets increased by 2.7x with only an 8% rise in total liabilities, giving rise to a 5.0x increase in total equity

Reasons for significant growth: • 40% growth in volume of sales caused by 25% uranium production growth and sale of uranium from the warehouse •

Growth of average uranium sales price

•

Sales of uranium to foreign customers

Note: Average USD/RUB exchange rate of 0.0313 and 0.04034 for 2009 and 2008 respectively.

1919

Transfer from Russian resource classification system to NI43-101

NI43-101 includes indicated and Inferred resources and doesn’t take into account prognosticated resources.

Russian resource classification system takes into account all resource types.

Resource base presented in reports

NI43-101

Uranium One’s Kazakhstan assets have potential to increase their production and resource base by transferring P1 resources into indicated or inferred when company and broker’s reports are produced

Measured Indicated Inferred

C1 C2

Prognosti cated

Comparison of Russian and NI43-101 Resource Base: Akbastau, Karatau, Akdala, S. Inkai, Kharasan, tU NI 43-101 Measured & Indicated 127 991

Russian system C1 + C2

In practice, exploration results at Akbastau show P1 resources transferred to Inferred and indicated resources to NI 43-101 classification with minimal losses (see graph “Akbastau, exploration results, tU”)

Russian system

128 955

Difference tU

964

Akbastau, Exploration results, tU 100 000 80 000 60 000

Subsequently, U1 production and financial performance improve causing the share price to increase once forecasts are based on NI43-101 criteria

55 769

40 000 20 000

Compliant resources increased by 43%

43 965 24 547

25 100

11 453

0 2004 C1 Indicated

2009 C2 Inferred

P1 prognosticated