According to Dundee Securities:

March 1, 2013

BUY, Speculative Risk*
Dundee Target: N/A 

Positive Preliminary Met Results Next Step in De-Risking Deposit  

Conclusion: We continue to recommend Kivalliq Energy as a BUY with no target price. KIV is on our Mineral Exploration Watch List. Overnight Kivalliq released positive preliminary metallurgical test work from its Lac 50 Trend in Nunavut. Early work suggests a low impurity and highly concentrated yellowcake product can be produced via alkaline leach methods.

We believe this work will be incorporated into the NI 43-101 resource report to be filed imminently. Kivalliq is still contemplating a PEA, although exploration remains the focus for now with a two phase budget of $15.5 MM.

This is a good first step as management has successfully demonstrated uranium can be extracted with no fatal flaws in recovery, and it gives them a basis on which to eventually advance a PEA. Only alkali leaching was considered based on the results of the press release, although previous announcements had suggested that acid recoveries were also good (but probably consumed significant acid). High leach recoveries of 94.1% and 95.9% were achieved over 48 and 72 hours, respectively (Figure 1), using a modest temperature of 70°C and atmospheric pressure.

A high quality product was obtained having a uranium value (U) of 71.9% - buyers won't take less than 65%. This means very low impurities, as the product beat all required specifications (Table 1). Further work can look at optimization and extraction of other elements, primarily silver of which the Lac 50 Trend has 1.8 MM oz.

Only alkali leaching considered because the rocks host 13% carbonates and due to the presence of Mo (can impact post-leach solution). We believe this processing method may have other benefits once optimized. Alkali is a simple purification process, involving re-circulating of leach solutions which could mean lower reagent use (more environmentally friendly), and simplified tailings handling with possibility to use it for backfill. Reagent consumption totals 70kg/t sodium carbonate (soda ash) and sodium bi-carbonate (baking soda). This exercise was only completed on uranium; floatation was used on the sulphides. Recoveries were 94.1% and 95.9% over 48 and 72 hours.

60kg composite tested. Samples were taken from 51 drill holes at the Lac 50 Main Zone, Western and Eastern Extensions. Optimized results were obtained using: 74 μm (-200mesh) feed at 70°C, atmospheric pressure, 50% pulp density, sufficient oxidation, reagent addition rate of 70kg/t (50 kg Na2CO3 and 20 kg NaHCO3).

Think big picture here. Kivalliq controls 100% of a massive and emerging uranium camp. Lac 50 currently hosts 43.3MMlbs grading 0.69% U3O8, making it the highest grade deposit outside the Athabasca Basin. It has a great success rate, tripling its resource in the past two years at industry leading discovery costs ($1.32/lb). Kivalliq has now delineated 5 zones and 6 occurrences, with all but one of these new discoveries. This is a poly-metallic camp with potential byproduct credits that could help enhance economics. It's located just 150km south of AREVA's massive 130 MM lb Kiggivik project currently being permitted. An aggressive exploration program is planned again for this year and we expect KIV to surpass the 50 MM lb threshold.

Two-phase $15.5 MM 2013 program. Plans are to target high priority areas within the Lac 50 Trend, as well select property-wide targets. We believe J4 upper and lower, Ray, Pulse, Hot Zone, Mushroom, and Nine-iron trend will be targeted. 25,000m of diamond drilling and 3,000m RC between two phases: P1 should cost $8 MM, commencing shortly and running until June with two diamond rigs and one RC; and P1 would commence in June, pending results from P1 and market conditions. Metallurgical testing, environmental studies, and engineering work will also proceed.