By Steven Ralston, CFA

OTC:DYLLF | ASX:DYL.AX

READ THE FULL DYLLF RESEARCH REPORT

Management's goal is develop Deep Yellow (OTC:DYLLF) (ASX:DYL.AX) into a Tier I, multi-jurisdictional uranium producer during the current uranium up-cycle. Currently, management is pursuing activities at an accelerated pace that will support the completion of a DFS on the Tumas Project with a 20+ year LOM operation, up from the 11 ½ years in the Pre-Feasibility Study (PFS) that was released in February 2021.

Since the beginning of 2021, Deep Yellow has achieved several highly significant milestones toward becoming a Tier I producer of uranium.

Tumas Project

Infill drilling programs between February and August 2021 at Tumas 3, Tumas 1 & Tumas 1 East contributed to an updated Mineral Resource Estimate, primarily through converting over 100% of the existing Inferred Resources to the Indicated Resource category. This upgrade drilling campaign was successful in supporting management's goal of expanding the LOM to over 20 years for the forthcoming Definitive Feasibility Study (DFS), which is expected to be completed in the second half of calendar 2022.

2021 Tumas Drilling Programs

Between February 2021 and June 2021, Deep Yellow completed a multi-phase, 911-hole, 17,679m infill RC drilling program at Tumas 3, which is comprised of Tumas 3 Central, Tumas 3 West and Tumas 3 East. The infill drilling program, which utilized three RC drill rigs, targeted the lateral extensions of the Tumas 3 deposits. Drill holes were surveyed with down-hole radiometric gamma logging providing data to confirm grade continuity across the drilled areas. A 117% conversion of Inferred Resources to the Indicated category was achieved.

Thereafter, between June 18^th and August 12^th, Deep Yellow completed a 556-hole, 6,982m infill RC drilling program at Tumas 1 East, a discrete mineral deposit within the palaeochannel system at Tumas. The uranium mineralization was located at a depth between 1m and 15m depth with an average thickness of 5.5m. With the closer drill-hole spacing, a 102% conversion of Inferred Resources to the Indicated category was achieved. The result was a Maiden Indicated Mineral Resource of 19.6Mlb eU₃0₈ at 245ppm. Furthermore, an Inferred Mineral Resource of 9.2Mlb eU₃0₈ at 216ppm has the potential to be upgraded through additional drilling programs, along with adequately testing the remaining 35%-45% of the existing, highly prospective Tumas 1 East Mineral Resource. This upgraded Mineral Resource for Tumas 1 East contributed to an updated Mineral Resource Estimate of the total Tumas Project.

Updated Mineral Resource Estimate

The 2021 drilling programs at the Tumas Project contributed to a significant upgrade of the company's estimated Mineral Resource. The Tumas deposits now have estimated Indicated Resources of 98.7 million lbs. U₃0₈ grading at 266ppm uranium, up from the pre-2021 drilling program estimate of 52.6 million lbs., and also up from the intermediate updated Mineral Resource Estimate of 79.1 million lbs. announced on July 29^th.

Since early 2020, exploration and infill drilling programs have increased the Estimated Indicated Mineral Resource at the Tumas Project by 250% to 98.7 million lbs. U₃0₈.

Updated Ore Reserve Estimate

The significant increase in Estimated Indicated Mineral Resource at the Tumas Project prompted an update of the Ore Reserve estimated in the February 2021 Pre-Feasibility Study. Using the same factors utilized in the PFS, the Estimated Probable Ore Reserve was updated to 68.40 million lbs. eU₃0₈ at 345ppm, an increase of 121% from to 31.0 million lbs. in the Maiden Reserve estimated in the PFS. The upgrade indicates a LOM operation of approximately 26 years.

Omahola Basement Project

The Mineral Resource Estimate at the Omahola Project was upgraded from a Measured, Indicated and Inferred Resource base of 45Mlb at 420ppm eU₃0₈ at a cut-off of 250ppm (JORC 2004 Code) to 125.3Mlb at 190ppm eU₃0₈ at 100ppm cut-off (JORC 2012 Code). The upgrade occurred through a thorough review of the underlying data of the three resource deposits. On October 5, 2021, a 200-hole (7,100m) shallow RC drill program commenced in order to identifying new mineralized areas beyond the known deposits.

Located on EPL 3496, the Omahola Project currently consists of three distinct deposits (Ongolo, MS7 and Inca), which were identified between 2009 and 2013. These shallow deposits, which occur at a depth of 20m to 250m, are a second type of uranium mineralization at the Reptile Project described as basement/alaskite. Usually referred to as uraniferous leucogranites, alaskite (a local term) dyke-like formations were formed by molten granite intruding into sedimentary rock. It is postulated elevated uranium grades occur when high-grade metamorphism causes a partial melting of basement rocks, which enhances the transportation and enrichment of uranium ore, such as at Rössing South.

Alaskite Alley, a north-south trending zone of occurrences of uraniferous leucogranite, currently supports two mines (Rössing and Husab), where the primary mineralization of the ore bodies is usually found in sheets of uranium-rich, granite-hosted alaskite (pegmatitic alkali-leucogranite). Rössing and Husab are almost due north of the Reptile Project, and Alaskite Alley appears to cut through the western part of Deep Yellow's EPL 3496 tenement, in which Deep Yellow has discovered these three uranium deposits.

Barking Gecko

A Phase 1 (14-hole 3,561m) follow-up RC drilling program at the Barking Gecko North prospect was completed on October 6^th 2021. The results are encouraging; however, further drilling is necessary to test the potential extension of mineralization both directionally and at depth. A 3,500m Phase 2 drilling program is being planned.

URANIUM INDUSTRY

Recent developments in the uranium industry have accelerated the pace toward the impending supply-demand imbalance expected to occur in the 2023-2025 timeframe. Several catalysts have stimulated three major increases in the price of uranium in the spot market: the first from $18 per pound to the mid-$20 range, the second from $22 to the $28-$34 range, and now a third leg up to $45-$50 range. These catalysts have increased the visibility of the structural supply deficit to both utilities and investors, highlighting the transparency of the true incentive price needed to economically bring sufficient capacity on-line.

The catalysts include:

Production Rationalization by the major producers of uranium (Kazatomprom and Cameco)

• Starting in 2016 and continuing today, the rationally planned curtailments of production by the two major producers of uranium (Kazatomprom and Cameco) has resulted in a shrinkage of secondary supplies, which stabilized and initially reset the price of U₃0₈ in the transaction market.

◦ Between 2017 and 2020, Kazatomprom reduced uranium production from 26,600 t U₃0₈ in 2016 to 19,477 t U₃0₈, which includes approximately 3,300 t  U₃0₈ due to the impact of the COVID-19 pandemic.

◦ Cameco halted production at Rabbit Lake in 2016 and at McArthur River in 2018. Subsequently, Cameco had to purchase material in the spot market in order to meet the company's delivery commitments.

COVID-19 prompted the shutdown of several uranium mines in Canada, Australia and Africa, which accelerated the inventory drawdown of secondary supplies.

The price of U₃0₈ bottomed at $10.00 per pound in November 2016 in the spot market. As Cameco and Kazatomprom rationalized production, uranium rallied to $28.90 in January 2019 before settling in the $24-$26 range. Then in March 2020, the outbreak of COVID-19 impacted uranium production. Cameco suspended production at Cigar Lake, and approximately 3,300 t U₃0₈ of Kazatomprom's production was lost as a result of the pandemic. As a result, the price of U₃0₈ spiked up to $34.

The launch of the Sprott Physical Uranium Trust has significantly impacted the availability of secondary supply and also has brought greater transparency to the sequestering process.

• Sprott created the Sprott Physical Uranium Trust (SPUT) through the acquisition of Uranium Participation Corporation (UPC) in April 2021 and its subsequent restructuring into a purchaser and stockpiler of U₃0₈. SPUT was formally launched on August 17, 2021 and it immediately commenced to purchase uranium purchase in a program funded by an initial $300 million at-the-market (ATM) financing. Through the initial and subsequent ATM financings, SPUT has raised just under $1.0 billion (under the current $1.2 billion authorization) and purchased & stacked 21 million pounds of U₃0₈. Though other entities have sequestered uranium (e.g. Yellowcake plc, Energy Fuels and Uranium Energy), the Sprott Physical Uranium Trust has added significant scale to the sequestering market mechanism. The price of U₃0₈ reacted by rallying to about $50.00 per pound in the spot market and has settled in the $45-$47 range.

Policy commitments by major countries are attempting to reduce carbon emissions in an effort to thwart global warming. Governments and individuals are coming to realize that nuclear power can provide green electrical energy with an extremely low carbon footprint.

• China is planning for nuclear energy to provide 70GW by 2025 under its 14th 5-year plan, up from 51GW currently. Furthermore, China is planning to build 150 new nuclear reactors over the next 15 years.

• In the United States, the recently enacted Infrastructure Bill allocates $6 billion to prevent premature retirement of existing reactors and $2.5 billion to develop advanced reactors.

• In France, President Emmanuel Macron announced on November 9^th that France will pursue the construction of new nuclear reactors in order to reduce carbon emissions.

• Japan is planning for nuclear power to provide 20%-22% of the country's energy by 2023.

These catalysts are rebalancing the uranium market, positioning it to achieve the incentive price required to economically develop and bring online sufficient new uranium mine production capacity in order to satisfy the structural supply deficit in the out-years.

In 2021, the demand for uranium is estimated to be approximately 191 million pound of U₃0₈, while primary production is expected to be only 129 million pounds. The 62 million pound gap will need to be satisfied by secondary supplies. The cumulative gap is estimated to total 205 million pounds through 2025 and rise to 334 million pounds by 2028.

With growing long-term demand for uranium fuel, the gap between future demand and supply is widening. Higher uranium prices are necessary for existing mines to return to production and for new mines to be developed.

Traditionally, nuclear electric utilities have tended to negotiate and enter into uranium term supply contracts in the fall, after the World Nuclear Association conference in early September. At the conference, all the major industry players meet and share information in order to gauge the current status on the nuclear energy industry. Equipped with this knowledge, representatives of nuclear electric are better prepared to make more informed decisions concerning the procurement of nuclear fuel.

For example, subsequently, on November 12, 2021, Kazatomprom signed two term contracts with China, i.e. with China National Uranium Company Ltd. (CNNC) and State Nuclear Uranium Resources (NPTC).

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 $100 million and trading above $0.30 per share. This process captures a range of well-funded junior uranium development companies. Currently, the P/B valuation range of these comparable companies is between 4.6 and 10.3. With the expectation that Deep Yellow's stock will attain a mid-second quartile P/B ratio of 7.8, our comparable analysis valuation price target is US$1.45.

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