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Uranium Week: On The Rise

Weekly Reports | Sep 18 2018

The spot uranium price is now 50% above its 12-year low.

-IAEA warns of nuclear capacity decline
-Spot price continues uptrend
-Toro Energy excited by test results

By Greg Peel

A report released last week by the International Atomic Energy Agency warns that global nuclear power generating capacity is at risk of declining over coming decades as ageing reactors are retired and the industry struggles with diminished competitiveness. The report presents what a stock analyst would call bear and bull cases.

The bear case has global nuclear capacity falling by -10% to 2030 from 392GW in 2017. The bull case has capacity increasing 30% to 511GW, but this is -45GW less than the same report projected last year. In 2017, nuclear power represented 10% of global electricity generation and around a third of "green" power.

One wonders to what extent of a "warning" the IAEA is providing with a -10% to +30% range of possibility over 12 years. At the end of the day it will be a battle of the swings and roundabouts as the developed world leads the decline in nuclear capacity (Germany and South Korea phasing out, for example, the US at risk of a commercially driven decline, Australia steadfastly anti despite being one of the world's biggest uranium producers) while the emerging world leads the charge in new reactor builds (China in particular, but India, South Africa and other EMs on board).

And Japan in the middle, having to date restarted a mere nine of its 40 plus operating reactors over the past seven years.

Fifty Percent

The spot uranium price is yet to return to a level that might prompt miners into restarting shuttered production and is still well below that which would inspire new mine investment from scratch. But as of last week, the spot price has now rallied 50% from its twelve-year low.

That low of US$17.75/lb was marked in December 2016 and last week industry consultant TradeTech increased its weekly spot price indicator by US50c to US$27.20/lb. That's the highest level in two years.

After a period of indifference earlier in the year, the market now continues to record robust weekly spot volumes. Last week saw 1.8mlbs U3O8 equivalent change hands, TradeTech reports, with utilities, intermediaries and speculators all represented on the buy-side.

No new transactions were reported in term markets, but there is one tender out for close to 10mlbs U3O8 for the delivery period 2021-30. TradeTech's term price indicators remain at US$29.50/lb (mid) and US$31.00/lb (long).

No Bull

Australia's federal government has limited uranium production in the country to only four mines. One is in the Northern Territory and is currently not mining new material, and three are in South Australia, with one shut down pending improved uranium prices. South Australia is the only state in which uranium mining is not banned by the state government.

Queensland was about to lift its ban but then the government changed. Western Australia had lifted its ban but then the government changed.

The new WA government nevertheless ceded to the protests of mining companies that had already sunk finds into mine development in the state at the time the ban was lifted. They numbered four, one of which is the Wiluna project owned by Toro Energy ((TOE)), and are exempted from the ban.

Last week Toro announced recent leach results at the site "far exceeded" expectations. The company has guided to 1.3m tonnes of ore production per annum over a mine life of sixteen years.

But first, Toro will have to convince the federal government to provide permission for a fifth mine in the country.

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