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Uranium Week: The Chase Is On

Weekly Reports | Nov 13 2018

As interest from financial investors and ongoing producer purchases continue to push up the uranium spot price, utilities are now in a hurry to top up supplies before year end.

-UTC launches IPO
-Purchases for year-end increasing
-Utilities back in the game

By Greg Peel

As producer purchases of uranium continue to underpin spot prices, with Cameco now having specifically disclosed its purchase intentions through  2018-19 (See: Producer Power from last week), the spotlight swung back last week to the other non-end-users of uranium, financial investors.

Investment vehicle Uranium Trading Corp launched its initial public offering last Wednesday, looking to raise US$50m, with pricing expected this week. UTC will list on the NYSE.

According to UTC’s statement, the company will focus on 1) commercial business and trading opportunities in the international uranium market to generate value for UTC investors with defined risk exposure; and 2) a pathway for interested investors to invest in the storage of physical uranium with the goal of achieving capital appreciation as a result of price increases due to expected future fundamental supply and demand imbalances.

At this stage at least, the latter focus dominates. At least 85% of proceeds will initially be directed towards the purchase of U3O8.

The pending IPO was announced in June so no surprises, and while Cameco may have the week before disclosed its actual shopping list, purchaser buying has been underpinning the market for some time, as utilities seemingly dither about if or when to jump in.

Utilities have mostly stayed on the sidelines in past months given the uncertainty surrounding the US section 232 investigation by the Trump administration into whether support for US uranium producers should be considered a matter of “national security” in the face of cheap imports from both friend and foe. The outcome of the investigation, which could yet be some time off, could well impact on uranium pricing.

But with the spot uranium price now up 45% from its 2018 low and 64% up from the twelve-year low of US$17.75/lb marked in December 2016, utilities appear to have become more anxious.

Two utilities are currently negotiating with potential suppliers for mid-term deliveries, industry consultant TradeTech reports, one for 10.8mlbs over 2019-23.

Two new utilities entered the market last week looking for sizeable quantities in both the mid and long term periods, one for 2.65mlbs beginning 2020.

At the short end of the curve, things are getting shorter. Until last week the bulk of material traded in the spot market involved delivery in 2019, last week the majority of traded volume called for delivery before year-end. A total of 1.3mlbs U3O8 equivalent changed hands over the week at consistently rising prices.

TradeTech’s weekly spot price indicator rose US30c to US$29.10/lb.

With the consultant’s term price indicators set at US$30.00/lb (mid) and US$31.00/lb (long), the forward curve continues to flatten.

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