The competition for uranium supplies among nuclear power providers has ramped up as of late, as an increasing number of financial investors bet on a bullish sector.
Raw uranium, also known as yellowcake, has seen prices skyrocket to the highest since 2014, as a newly-created investment trust from Canadian-based Sprott Asset Management snaps up uranium supplies. Since first launching an at-the-money program in August, the asset manager has bought over 10 million pounds of uranium via its Sprott Physical Uranium Trust (TSX: U.UN).
The trust plans to purchase even more uranium, upping its initial ATM financing from $300 million to $1.3 billion, helping push uranium prices even further upwards. When combined with previously purchased uranium from a former fund, Sprott’s total uranium holdings amount to over 28.3 million pounds of the metal, which could provide enough power for France’s entire nuclear industry for a year.
Sprott’s sharp buying tactics will likely create added pressure on utilities, many of which need to ensure adequate supplies necessary for vital energy generation. The latest demand for yellowcake also comes as China is expected to ramp up its nuclear power capacity for the next ten years. As of current, long-term contracts account for 98% of yellowcake required by utility companies in the US; however, that figure is expected to decline to 84% come 2022, followed by a decline to around 55% before 2025, according to projections from Yellow Cake.
According to data obtained from the World Nuclear Association, demand for yellowcake is expected to rise form 162 million pounds to around 206 million pounds before the end of the decade, followed by a further increase to 292 million pounds by 2040. Simultaneously, uranium supplies are expected to decline by about 15% by 2025, followed by a subsequent depletion of at least 50% by the end of the decade, as investment into new mines dries up.
The Covid-19 pandemic also helped erode uranium supplies, as Cameco, one of Canada’s largest mining companies, temporarily halted production at its Cigar Lake mine in response to labour shortages. Since the beginning of the year, Cameco shares have jumped by nearly 70%.
In the meantime, the Sprott uranium trust, which currently trades on the TSX, plans to make its public debut on the NYSE sometime in 2022, which according to Canaccord, could lead to additional purchases. The Sprott Physical Uranium Trust buys physical uranium stored in Canada, the US, and France via WMC Energy. In exchange, Sprott collects a 0.35% management fee, in addition to a 1% commission fee based on the gross value of purchases or sales of uranium.
Information for this briefing was found via Sedar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.