All purchases and sales of uranium of UPC are directed by the Board and are made by the Manager on behalf of UPC in accordance with the 2019 MSA. Title to the uranium remains with the Corporation. The Manager is obligated to use commercially reasonable efforts to purchase and sell the uranium at the best prices available to it over a prudent period of time. When the Board directs the Manager to purchase or sell uranium, the Manager may put out a tender for an offer to purchase or sell uranium or negotiate directly with potential suppliers or buyers (off-market transactions) for the purchase or sale of uranium. Typical purchasers or sellers of uranium include producers, traders, financial institutions and utilities that operate nuclear power facilities. All purchases and sales of uranium are completed by the Manager in accordance with standard industry practices for and on behalf of UPC and are approved by the Board.
There is no public commodity market through which these purchases and sales may occur and accordingly all such purchase and sale transactions are private. The pool of potential purchasers and sellers is limited and each transaction may require the negotiation of specific provisions. Accordingly, a purchase or sale pursuant to a tender or an off-market transaction may take several weeks to complete. Since all purchases are confidential, neither the Manager nor UPC is permitted to publicly disclose the identity of any vendor from whom UPC would potentially purchase uranium or any purchaser to whom UPC may sell uranium.
The Corporation may also source uranium through merger and acquisition transactions. Any potential transactions are referred to the Board by the Manager for consideration, direction and ultimate approval.
UPC is also permitted to enter into lending or relocation arrangements for its uranium. When the Board directs the Manager to lend uranium, the terms of the loan are reviewed, including the quantity, interest rate, duration, security and covenants, and must be approved by the Board prior to finalizing. Any lending or relocation arrangements for uranium will be completed by the Manager in accordance with standard industry practices for and on behalf of UPC.
The Manager is required to arrange, on behalf of the Corporation and its subsidiaries, for storage of the uranium at the Facilities and for insurance coverage. It is also responsible for the preparation of draft regulatory filing materials including financial statements, investor relations activities including responding to shareholder requests and to furnish office facilities to the Corporation.
In the event that the Board determines that it would be beneficial to purchase, sell or loan U3O8 or UF6 from or to the Manager, or one of its affiliates, or any other related party (as such term is defined in Multilateral Instrument 61-101) of the Manager, then the specific terms of such purchases or sales for all amounts over $1,000,000 in the aggregate must be approved by the Board. To date, three such transactions have occurred. In June 2007, the Corporation purchased 75,000 pounds of U3O8 from an affiliate of the Manager at a price of US$130.00 per pound for total consideration of US$9,750,000; in August 2008, the Corporation purchased 50,000 pounds of U3O8 from an affiliate of the Manager at a price of US$64.50 per pound, for total consideration of US$3,225,000; and in January 2011, the Corporation loaned 150,000 pounds of U3O8 to an affiliate of the Manager, which loan was subsequently repaid.
The Manager does not have any ownership interest in UPC, and the two companies do not have any directors in common.
Under the 2019 MSA, the Corporation pays the following management fees to the Manager: (a) a base fee of $400,000 per annum, payable in equal quarterly installments; (b) a variable fee equal to (i) 0.3% per annum of the Corporation's total assets in excess of $100,000,000 and up to and including $500,000,000, and (ii) 0.2% per annum of the Corporation's total assets in excess of $500,000,000; (c) a fee, at the discretion of the Board, for on-going monitoring or work associated with a transaction or arrangement (other than a financing, or the acquisition of or sale of U3O8 or UF6); and (d) a commission of 1.0% of the gross value of any purchases or sales of U3O8 or UF6 or gross interest fees payable to UPC in connection with any uranium loan arrangements.
Under the terms of the 2019 MSA, any directors, officers, employees or consultants of the Manager who serve as officers of UPC are paid by the Manager and do not receive any remuneration from UPC for their work on behalf of the Corporation.
The 2019 MSA may be terminated during its term, subject to certain exceptions, by the Manager upon the provision of 180 days' written notice and by UPC: (a) at any time, upon the occurrence of a material breach of the 2019 MSA by the Manager, (b) upon 30 days' written notice and payment to the Manager of an amount equal to the base and variable management fees that would otherwise be payable to the Manager (calculated based on the Corporation's current uranium holdings at the time of termination) for the lesser period of three years from the date of the written notice or the remaining term of the 2019 MSA, and (c) within 90 days of certain events surrounding a change of both of the individuals serving as Chief Executive Officer and Chief Financial Officer of UPC, and/or a change of control of the Manager.
For more information, refer to the Corporation's most recent Annual Information Form.