Weekly Reports | Jul 04 2018
FNArena's original Uranium Week article published yesterday inadvertently transposed 8.1mlbs of uranium to be purchased by Yellow Cake as 1.8mlbs. (See below) FNArena apologises for this error.
The launch of a new speculative uranium fund in London has the market’s attention, but prices remain stable.
-Yellow Cake to list on AIM this week
-Raising oversubscribed
-Uranium market on hold
By Greg Peel
There are now 451 nuclear reactors in operation in 30 countries, the International Atomic Energy Agency reports, providing some 11% of the world’s electricity and around a third of all low-carbon electricity. There are currently another 58 reactors under construction, and 30 more countries are considering introducing nuclear power.
So why is the uranium price so stubbornly low?
The IAEA believes there are sufficient identified uranium resources in the world to fuel nuclear reactors for well over a hundred years.
Which seems to be the issue, although the agency also suggests the current state of global oversupply is finite and will not last.
One London investment banker is in agreement with the IAEA, and clearly others support his view that the uranium market is “structurally mispriced”. Peter Bacchus sought GBP150m from investors to launch Yellow Cake plc and the raising was oversubscribed. The company will list on the London Stock Exchange’s Alternative Investment Market on Thursday.
The uranium market has been highly focused on the listing given Yellow Cake has committed to purchasing 8.1mlbs U3O8 from Kazatomprom, or one quarter of the Kazakhstan state-owned miner’s annual production, with an option to purchase a further US$100m worth each year over the next nine years. Bacchus hopes to “tighten the market”.
Stable Prices
Indeed he might. In the meantime, increased buying from end-users in the June quarter means further purchases are now discretionary and price sensitive. Sellers backed off their offers in the spot market last week, industry consultant TradeTech reports, ahead of the Yellow Cake listing, but to no avail.
TradeTech’s weekly spot price indicator remains unchanged at US$22.75/lb. A total of 800,000lbs U3O8 equivalent changed hands in six transactions last week.
In the June quarter, May was the big month for spot volumes. June saw a -54% decrease from May to 3.4mlbs.
The month ended with TradeTech’s daily spot price indicator at US$22.75/lb, up a mere US5c from end-May. There remains anticipation of renewed buying interest, but it is yet to emphatically materialise.
Stability in the market nevertheless has resulted in TradeTech’s term price indicators not falling in June. They remain at US$26.50/lb (mid) and US$28.00/lb (long).
Note that Australian-based Tribeca Investment Partners is also preparing for the launch of a new fund that will target the uranium sector. It is reportedly a closed-end fund that is seeking to raise A$100 million.
Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided.
