EU

Business Context and Reporting Period

Company: Encore Energy Corp. (EU)

Reporting Period: Quarter ended September 30, 2025 (Q3 2025)

Business Overview: enCore is a U.S.-focused uranium exploration and extraction company utilizing In-Situ Recovery (ISR) technology. As of the reporting date, the Company remains an "Exploration Stage Issuer" under SEC Regulation S-K 1300 as it has not yet established proven or probable mineral reserves. Operations are centered in South Texas (Rosita and Alta Mesa projects) with development projects in South Dakota (Dewey-Burdock) and Wyoming (Gas Hills). The Company became a U.S. Domestic Issuer and Large Accelerated Filer effective January 1, 2025.

Key Financial Metrics

Operational Metrics (9M 2025): Sold 480,000 lbs of U3O8 at an average realized price of $64.13/lb. Cash cost of extracted uranium sold was $26.20/lb.

Material Changes vs. Prior Period

• Revenue Decline: Revenue decreased 32% year-over-year for the nine months ended September 30, 2025, driven by lower contracted sales volumes (480,000 lbs vs. 530,000 lbs) and a 24% decrease in realized sales prices ($64.13/lb vs. $84.85/lb).
• Improved Gross Margin: Despite lower revenue, the Company achieved a gross profit of $4,999 (9M 2025) compared to a gross loss of $(6,919) in the prior year. This was driven by a significant reduction in the cost of sales (down 50%) due to selling more extracted uranium at lower costs and less purchased uranium inventory.
• Debt Financing: In August 2025, the Company issued $115 million in 5.5% Convertible Senior Notes due 2030. Proceeds were used to repay a related-party uranium loan and fund operations. This resulted in a new long-term debt balance of $109.3 million.
• Investment Gains: The Company recognized a realized gain of $7.7 million and an unrealized gain of $1.1 million on marketable securities for the nine months ended September 30, 2025, primarily from the sale of Anfield Energy Inc. shares and favorable market conditions, offsetting operating losses.
• Cash Position: Cash and cash equivalents increased from $39.7 million to $91.9 million, bolstered by the convertible note issuance and reduced inventory purchases.

Guidance, Outlook, and Risks

Outlook and Management Commentary:

• Production Growth: Management highlights increased operational activity with 30 active drill rigs in South Texas as of September 30, 2025, up from 6 at the start of 2024. New uranium roll fronts have been discovered at the Alta Mesa project, potentially extending mine life and reducing extraction costs.
• Permitting Milestones: The Dewey-Burdock Project in South Dakota was approved for inclusion in the FAST-41 Program for accelerated permitting. The EPA Environmental Appeals Board denied a petition to block the project's underground injection permits, allowing advancement toward state permitting.
• Strategic Focus: The Company aims to become a leading domestic uranium supplier, leveraging U.S. government initiatives (Executive Orders on energy dominance) and the growing demand for nuclear fuel.

Risks and Contingencies:

• Internal Controls: The Company disclosed material weaknesses in internal control over financial reporting, specifically regarding IT general controls and process-level financial reporting controls. Remediation is ongoing but controls are not yet deemed effective.
• Litigation: A putative securities class action was filed in March 2025 alleging failures in internal controls and capitalization of costs. Additionally, a settlement of approximately $922,000 was reached with the former CEO regarding an employment dispute.
• Exploration Stage Status: As an Exploration Stage Issuer, the Company has not established proven or probable reserves, creating uncertainty regarding the commercial viability of its projects.
• Market Volatility: Revenue is heavily dependent on uranium spot prices and the ability to secure long-term off-take agreements.

Investor Verification Checklist

• Reserve Status: Verify the timeline and feasibility of establishing "proven or probable" reserves to exit Exploration Stage Issuer status, which impacts capitalization of development costs.
• Internal Control Remediation: Monitor progress on remediation of material weaknesses in internal controls over financial reporting to ensure future reporting reliability.
• Debt Covenants: Review the indenture terms of the $115 million Convertible Senior Notes, specifically conversion triggers, redemption rights, and interest payment obligations.
• Permitting Progress: Track the status of the Dewey-Burdock Project's state permitting and the renewal of the NRC Source Material License.
• Cost Structure: Validate the sustainability of the reported cash cost of $26.20/lb for extracted uranium as production scales and purchased inventory is depleted.