2013 has been another productive year for Kivalliq. Much has happened since our last CEO Update in May of this year.¹  Despite sustained weakness in the uranium spot price (20% drop since Jan 1, 2013) and mining equity capital markets (27% drop in TSX-V index since Jan 1, 2013); we continued to march our flagship Angilak Property forward. Advancement of Angilak evolved this year to focus on de-risking the project by evaluating potential extraction and processing options for the Lac 50 uranium deposit.  Continued exploration success in the summer, as well as positive results from preliminary metallurgical and beneficiation studies, underscore Angilak’s potential as a world-class uranium project.

ML and J1 Zones Discoveries

The newly-discovered ML and J1 zones underscore the “District Scale” potential of our Angilak Property. The geological similarity and proximity of the ML and J1 zones to the current Lac 50 Trend* inferred mineral resource supports our belief that we can continue to expand the resource base through drilling. The 2013 ML and J1 discoveries bring the count to 12 new zones drilled within the highly prospective Lac 50 Trend since 2010.^2,3

Geochemical Sampling Program Success

One of the many highlights of the 2013 exploration program was the outcome of soil geochemical surveying within the Lac 50 Trend. Using a widely spaced sampling pattern, 387 anomalous uranium (“U”) soil geochemical results (using a 75th percentile threshold) were reported over the entire width and length of the Lac 50 Trend and along the new Nine Iron-KU Trend situated 5.5 kilometres south. Results from this program increase our confidence in the exploration potential of specific geophysical conductors along the entire Lac 50 Trend and will be valuable when prioritizing geophysical conductors and selecting specific drill sites on future programs.⁴

Continued Positive Metallurgical and Beneficiation Results

Further metallurgical testing continued to show improved recoveries and demonstrated consistency across all Lac 50 deposits. Using optimized parameters, 96.4% of the uranium was extracted from a representative Lac 50 composite in 48 hours from conventional alkaline leaching.  Initial beneficiation tests of rock samples from Lac 50 also provided encouraging results due to the amenability to radiometric sorting. Preliminary ore sort characterization using radiometric sorting demonstrated a 56% reduction in mass with 98.1% U3O8 recovery. Results from these on-going tests in 2013 have positive implications for the potential to cost-effectively extract uranium and produce an attractive final yellowcake product from the deposits within the Lac 50 Trend.⁵

Increasing Kivalliq’s Footprint in Nunavut Territory

Kivalliq added to its project portfolio through the acquisition of the Baker Basin Uranium Property in the geologically prospective Baker Lake Basin of Nunavut Territory, Canada. This property consists of 232,262 acres and has multiple target zones based on results from previous exploration work including promising historic drill assays. Our extensive northern exploration experience, as well as our relationships and award winning environmental track record in Nunavut Territory, give us a competitive advantage to rapidly advance the Baker Basin Property.⁶

Uranium Supply Fragile

2013 saw several events that emphasize the fragile nature of global primary uranium supply and the need for considerably higher prices. Further delays at planned development projects; reduction of future production guidance from existing mines; and the cessation or severe curtailment of existing operations; have all put considerable pressure on the supply-side. We believe that in this current pricing environment, supply reduction will continue to be a prevailing theme. As supply tightens and demand steadily grows, market observers are forecasting significant supply deficits in the near to mid-term. The advancement of Angilak should coincide well with these favorable uranium market fundamentals.

2014 and Beyond

Despite a significantly reduced exploration budget, our technical team delivered another year of meaningful results in 2013. The discovery of the ML and J1 zones; the targets generated and refined by the geochemical sampling program; and positive initial results from ongoing metallurgical and beneficiation studies; all further demonstrate Angilak’s “District Scale” potential. Looking ahead, we will continue to advance Angliak as aggressively as possible throughout 2014/15, within the context of prevailing market conditions.

Communication

We encourage you to review our latest presentation and sign up to receive Kivalliq news releases at www.kivalliqenergy.com. The Nuclear Energy Institute (NEI) has created an e-book which provides an excellent overview of nuclear energy.
http://www.emagcloud.com/et/Just_the_Facts_2012/index.html#/1/

The entire Kivalliq team would like to thank you for your continued support and wish you a very prosperous, happy, and healthy New Year.

All the best,

Jim Paterson, CEO

Related 2013 News Releases

¹ May 4: Kivalliq Energy CEO Update
² June 4: Kivalliq Drills New ML Zone in Lac 50 Trend; Update on Phase 1 Exploration at Angilak Property
³ June 27: Kivalliq Reports Assay Results from 2013 Drilling at the ML and J1 Zones
⁴ September 9: 2013 Geochemical Program Prioritizes Lac 50 Trend Drill Targets and Identifies New Zones
⁵ September 11: Kivalliq Announces Positive Metallurgical Results from J4 Zone and Ore Sorting Studies
⁶ October 15: Kivalliq Acquires Baker Basin Uranium Property in Nunavut Territory, Canada
^*January 15: Kivalliq Announces 60% Increase in Uranium Resource; Lac 50 Trend Deposits Expand to 43.3 million lbs U3O8

DISCLAIMER

Certain disclosures in this communication and related news releases, including the budget and exploration program proposed for the Angilak Property, constitute forward-looking statements that are subject to numerous risks, uncertainties and other factors relating to Kivalliq's operations as a mineral exploration company that may cause future results to differ materially from those expressed or implied in such forward-looking statements, including risks as to the completion of the plans and projects. Readers are cautioned not to place undue reliance on forward-looking statements. Other than as required by applicable securities legislation, Kivalliq 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.

Cautionary Note concerning estimates of Inferred Resources:

This communication uses the term “inferred resources”. Inferred resources have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an Inferred Mineral Resource will ever be upgraded to a higher category. Kivalliq advises U.S. investors that while this term is recognized and required by Canadian regulations, the U.S. Securities and Exchange Commission does not recognize it. U.S. investors are cautioned not to assume that part or all of an inferred resource exists, or is economically or legally mineable.