The uranium market, once languishing, is now experiencing what Joe Kelly, a seasoned broker in the uranium markets, terms as the “Atomic Revival,” marked by a significant surge in prices and renewed interest.
Over the past decade, uranium prices had been stagnant in the mid-$20 range, leading to a gloomy outlook for producers. However, a remarkable turnaround has occurred, with prices skyrocketing nearly 500% in the last couple of years, reaching over $100 per pound. This shift has created a unique scenario for brokers like Kelly, who interact with both buyers and sellers.
“Uranium is going through a bit of a Renaissance. […] For a 10-year period there, it was dead money,” Kelly said in a recent The Deep Dive interview.
Kelly, with 15 years of experience in the uranium business, emphasized the challenges faced during the previous “nuclear Renaissance” and the contrasting optimism surrounding the current Atomic Revival.
“Back in 2007, we also had what was called the nuclear Renaissance. […] Our old Renaissance really didn’t come about, it kind of turned a little sour. So we had a long time of a lack of prosperity and to now reuse the word Renaissance, we thought about, should we use that again?,” he added.
In the interview, Joe delved into the intricate dynamics between buyers and sellers in the uranium market. The Sprout Physical Uranium Trust, a significant player in the recent price surge, was a focal point of discussion. Despite concerns and skepticism from some buyers, Kelly explained how the trust played a crucial role in removing excess uranium from the market, paving the way for increased supply.
“Sprott is just a vehicle for investors to buy an equity, an ETF, and actually own physical uranium. […] They helped the supply come on the market,” Kelly said.
Kelly highlighted the delicate balance between satisfying both mining companies, optimistic about $500 per pound prices, and utilities, who prefer prices below $100 per pound. He shed light on the broker’s role in matching buyers and sellers, ensuring equilibrium in the market.
“We’ve seen a 500% jump here in prices from $20 to $100. […] We could see a bit of a pullback here to $60, which is still, you know, a 300x,” he observed. “All the mining companies think it’s going to go to $500 a pound and they keep telling a wonderful bull tale.”
The interview also explored the impact of the uranium price surge on spot and contract markets. Kelly discussed how utilities, anticipating a short-term anomaly, are holding off on striking contracts based on current spot prices. The shift in strategy involves market-related contracts, using future settlements with capped and floored prices to navigate market fluctuations.
When discussing future production, Kelly provided insights into the global landscape, pointing to various countries like Canada, Kazakhstan, Australia, and African nations as potential sources. He highlighted the excitement among producers, many of whom endured challenging times during the industry’s quiet phase.
As the Atomic Revival gains momentum, Kelly addressed a minor setback in the form of a temporary price adjustment. He attributed this adjustment to the rapid rise in prices and assured that the Atomic Revival would be a long-term trend.
“The Atomic Revival started around $30 something a pound price-wise. […] Right now, we’re probably momentarily going through a little price adjustment because we might have moved a little too quickly,” he quipped.
Uranium prices roar
In the latter part of January, uranium prices maintained a level of $106, marking the highest since 2007, as a series of supply challenges coincided with growing demand.
Kazakhstan’s state-owned Kazatomprom, the world’s largest uranium producer, meanwhile revealed its inability to meet production targets for the next two years due to input shortages and construction issues.
In a press release, Kazatomprom stated, “Kazatomprom expects adjustments to its 2024 production plans” due to issues related to the availability of sulfuric acid, a critical operating material, and delays in construction at new deposits. The company had initially planned to increase production to 90% in 2024, a decision based on successful contract signings with new and existing customers.
Following the production cut announcement by , uranium mining stocks in Australia, including Paladin Energy and Boss Energy, rallied, becoming the top-performing stocks in the country for the year.
The market now faces an increased deficit, prompting a positive response in uranium stocks globally. Other international uranium miners, such as CGN Mining Co. and Cameco Corp., also experienced gains, with the Global X Uranium ETF reaching its highest level since 2014. The heightened demand for uranium is driven by a renewed interest in nuclear power as part of global efforts to achieve net-zero targets.
Analysts as well are noting the impact of the cuts, with Cantor Fitzgerald recently revising its uranium price forecast following the guidance reductions. Previously projected at $90-$120 per pound of U3O8, Cantor now predicts prices in the range of $120-$150 per pound, with this outlook extending through 2028.
Despite potential mine restarts at Kazatomprom, Cantor believes they won’t be enough to bridge the supply deficit, projecting a significant upside for uranium prices. The firm also recommends a shift in investment towards physical uranium funds, high-quality developers, and U.S. domestic uranium restarts. This analysis prompted an average 20% increase in price targets for uranium companies covered by Cantor.
Worldwide uranium demand
In the midst of a global push for abundant and carbon-free energy, nuclear power is gaining traction as a reliable alternative. While solar and wind energy face hurdles, nuclear proponents emphasize the well-established benefits of nuclear fission: zero greenhouse gas emissions, proven technology with existing supply chains, and the crucial attribute of being a base load power source.
Concurrently, the US and 20 other nations, driven by ambitious decarbonization goals, announced plans to triple their nuclear power capacity by 2050. China leads this nuclear energy push, with 22 out of 58 global reactors under construction, while Japan resumed projects aimed at increasing nuclear power output.
In addition, Japan has officially included uranium in its list of critical minerals, citing concerns over the potential threat to supply posed by Russia’s dominant position in the mineral market. The decision aligns with Japan’s efforts to secure stable access to essential resources and ensure economic security, as outlined in the Economic Security Promotion Act.
The move comes concurrently with the classification of “advanced electronic components” as “Specified Important Supplies,” reinforcing Japan’s commitment to maintaining a reliable supply chain for key materials. The designation is part of the country’s broader strategy to boost its reliance on nuclear power, with plans to restart reactors that have been inactive since the Fukushima crisis.
Japan, lacking indigenous uranium, traditionally fulfills its annual uranium requirements—estimated at up to 8000 tons prior to the Fukushima incident—from global sources such as Australia (approximately one-third), Canada, Kazakhstan, and other uranium-producing nations, according to the World Nuclear Association.
This development follows recent news revealing Itochu Corp’s intentions to forge a uranium development agreement with Uzbekistan, a move seen as a crucial step in diversifying Japan’s uranium sources. Itochu Corp, Japan’s fourth-largest trading company, aimed to finalize the agreement by the end of January, with plans for new exploration for the mineral.
The company’s officials are scheduled to travel to Uzbekistan for discussions with representatives from the nation’s national geology and mineral resources committee. The visit coincides with a trip by Japanese Trade Minister Akira Amari to Uzbekistan, although specific details of the agreement have yet to be disclosed.
Public sentiment is shifting in favor of nuclear power expansion, reaching a decade-high support in the United States, according to a Gallup poll. In a significant move, 22 countries, including the U.S., pledged at the United Nations climate summit in Expo City Dubai to triple nuclear energy capacity by 2050, recognizing its key role in achieving global net-zero greenhouse gas emissions.
However, a potential stumbling block arises with concerns over uranium production capacity. Nicole Galloway Warland, managing director of Thor Energy, points out, “Where is that uranium going to come from? There’s not enough to go around. There’s a supply deficit.” This sentiment echoes the challenges faced by the global nuclear sector, struggling to find sufficient, affordable, and responsibly sourced uranium.
The aftermath of the Fukushima nuclear disaster in 2011 led to a decline in global uranium mining, and as demand surges, the supply remains relatively low. Even before the pledge to triple nuclear energy capacity, global demand for yellowcake uranium hit a ten-year high in October, leading to a subsequent increase in prices. Some speculators predict prices could skyrocket to around $200 per pound by 2025.
Grant Isaac, CFO at Cameco, asserts, “The days of buying $40 uranium are over — and probably also for $50 or $60. We’re going to need new supplies.” The increasing demand is not only driving up prices but also stirring geopolitical concerns as Russia dominates global uranium exports, complicating efforts to impose meaningful energy sanctions.
In response to these challenges, the Biden administration aims to boost domestic uranium production, acknowledging the need to reduce dependence on Russian supplies. While the U.S. possesses extensive uranium resources, the industry faces challenges in catching up due to decades of neglect. Curtis Moore, SVP of Marketing at Energy Fuels, notes, “We have let our industry and infrastructure atrophy over the past few decades.”
Renewed investor interest
Recent geopolitical events have set the stage for a new environment in nuclear energy, driving uranium demand. Countless sanctions against Russia, a key player in the industry, have tightened uranium markets, compelling Europe to refocus on nuclear energy amidst challenges in natural gas and oil sources. Simultaneously, major markets like Canada and the United States are renewing optimism for nuclear energy, evident in a multi-year high in public support.
The Sprott Physical Uranium Trust has acquired over 62 million pounds of uranium, further tightening an already constrained market. This surge has led to heightened investor bullishness, with the market hitting multi-year highs. However, questions loom about the implications for investors.
Nuclear energy is experiencing a renaissance, overcoming a period of global neglect following the Fukushima disaster in 2011. European countries like Germany, Belgium, and Switzerland moved away from nuclear power, resulting in high energy costs. However, policy changes are underway, with France approving a $52 billion nuclear investment plan and Germany subsidizing energy costs. In North America, developments include the opening of the first American nuclear reactor in decades and plans for nuclear plant expansions in Canada.
Uranium, unlike lithium, is predominantly found in a few select countries – Kazakhstan, Canada, Namibia, and Australia. Kazakhstan, producing 43% of global supply, poses challenges for investors due to its state operator dominance. Namibia’s production is influenced by China, while Australia boasts the world’s largest known uranium resources, accounting for approximately one-third of the global total.
Canada, particularly Saskatchewan, stands out as a uranium jurisdiction, hosting the Athabasca Basin, a leading source of high-grade uranium. Companies like Cameco, Orano, and others operate in this region, with ongoing projects and exploration activities.
Investors face unique challenges with uranium, given its heavy regulation and the inability for the average individual to buy it directly. Investing in uranium-focused companies or funds becomes the primary avenue for exposure. The current market dynamics draw parallels to the legendary ’08-’09 cycle, leaving investors both excited and wary.
In a Deep Dive interview with Corey Diaz, CEO of Anfield Energy (TSXV: AEC), he relayed that the company’s unique strategy and positioning in the uranium market made strategic moves to acquire valuable uranium assets at a time when the market was overlooked, and uranium prices were as low as $20 per pound.
“We’ve had some pretty dire years, 2016, 2017.. the price below $20… getting close to $100 reflects the scarcity of uranium availability in the marketplace and the fact that there’s a nuclear Renaissance happening now… you can see that the disparity between supply and demand is growing and being acknowledged in the marketplace so no surprise the uranium price is continuing to go up,” he commented
Anfield Energy stands out with ownership of one of only three licensed uranium processing mills in the United States, giving them a distinct advantage in capitalizing on the current tailwinds in the uranium market.
Looking ahead to 2024, Diaz outlines crucial milestones for Anfield Energy, including moving the mill’s license to operational status and updating the production profile with additional assets. He also hints at potential uplisting and expresses the company’s commitment to further exploration and development. Anfield Energy’s focus on securing domestic uranium supply aligns with the U.S. government’s efforts, offering opportunities for grants and funding to support the mining sector.
On the other hand, Troy Boisjoli from ATHA Energy (CSE: SASK) recently sat down with the ‘Dive to discuss the company’s significant merger with Latitude Uranium and 92 Energy.
In the interview, Boisjoli also delved into the evolving sentiment towards nuclear energy globally, highlighted by Poland’s announcement of constructing 24 new nuclear reactors. Boisjoli expressed confidence in the uranium market, with prices surpassing $80 per pound, asserting the necessity for further increases due to strong supply-demand fundamentals.
“Not only can it sustain itself, but it still needs to go higher. It needs to go higher for longer,” Boisjoli quipped.
The chief executive explained the potential for intense price movements given the sector’s limited options for investment, creating opportunities for companies like ATHA Energy.
“When you look at the total number of uranium companies out there, the total number of producers, explorers, etc., it’s a very very small market. So you know the similarities are, when the attention of the capital markets industry and of the investment community starts to turn towards uranium, there’s very few places to invest and there’s very few names in the uranium space. [..] It leads to extremely violent price action within the equities.”
“There has been a change in public perception, a step change in the understanding of the need and requirement for nuclear energy. That sets up an incredibly exciting time in the uranium space,” he noted.
As the uranium market experiences a surge, investors navigate uncertainties, balancing potential rewards with risks inherent in this unique and regulated commodity. The uranium boom is unfolding, and market participants are closely watching for signs of a repeat of past cycles that captivated junior mining investors.
Information for this story was found via Mining Magazine, Oilprice.com, Mining.com, and the sources mentioned within the article. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
FULL DISCLOSURE: Anfield Energy is a client of Canacom Group, the parent company of The Deep Dive. Canacom Group is currently long the equity of Anfield Energy. The author has been compensated to cover Anfield Energy on The Deep Dive, with The Deep Dive having full editorial control. Not a recommendation to buy or sell. We may buy or sell securities in the company at any time. Always do additional research and consult a professional before purchasing a security.
FULL DISCLOSURE: ATHA Energy is a client of Canacom Group, the parent company of The Deep Dive. Canacom Group is currently long the equity of ATHA Energy. The author has been compensated to cover ATHA Energy on The Deep Dive, with The Deep Dive having full editorial control. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security.