Uranium Week: Uranium And The Virus

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Uranium prices have not gone into a spiral along with other assets, but weakness prevails nonetheless.

-Uranium mining stocks fall net -17%
-DoE asks for comments on US government uranium purchases
-Paladin Energy sells Kayelekera

By Greg Peel

The recent coronavirus outbreak has triggered questions related to certain commodities markets, notes uranium industry consultant TradeTech. The nuclear fuel market is also exposed to outside economic and policy issues in today's global marketplace and even a limited market interruption or challenge has the potential to affect all sectors of the industry.

Uranium equities declined an average of nearly -17% last week, TradeTech reports, as investors weighed the potential economic impact of a slowing global economy on the nuclear fuel market In particular, China's nuclear power program, both domestically and abroad, may be challenged due to the economic stress of the recent quarantines and closure of businesses and manufacturing facilities.

Activity in the spot uranium market last week was slightly down on the week before, with 850,000lbs U3O8 equivalent changing hands in nine transactions. Prices dipped as the week progressed, TradeTech reports, spurred in part by the desire of some sellers to monetise their inventories, especially in light of volatility in the global financial and commodities markets this week.

Buyers are largely taking an opportunistic approach, hence sellers exhibited a greater willingness to drop prices in order to conclude transactions, which led to prices dropping consistently throughout the week.

TradeTech’s weekly spot price indicator is down -US30c at US$24.10/lb.

No transactions were reported in term markets but several utilities have entered into negotiations with preferred suppliers. TradeTech’s term price indicators remain at US$28.25/lb and US$33.00/lb.

Donald Trump included funds for the strategic purchase of uranium in his 2021 budget, yet to be debated in Congress, in order to support the US uranium industry. This week, the US Department of Energy extended the comment period for its recent Request for Information, which seeks comments on the key challenges related to reconstituting uranium mining and conversion capabilities in the US. Comments are now due on March 30.

However, as the trade war showed us, the White House or US government is prone to extending such deadlines if other matters are more pressing at the time. One presumes that Trump’s 2021 budget is now moot, with agreement on a virus-related emergency fiscal stimulus package currently being sought in Congress.

Paladin Energy

In Australia, Lotus Resources ((LOT)) announced last week it had completed the acquisition of the Kayelekera uranium mine in Malawi from Paladin Energy ((PDN)). The mine has been on care & maintenance since 2014 due to low uranium prices.

Lotus will acquire 85% of the asset, with the remaining 15% retained by the Malawi government. The sale price of $5m comprises of $200,000 in cash plus US$4.8m worth of Lotus shares, and Paladin will receive an ongoing royalty of 3.5% of revenues. Kayelekera hosts a high-grade resource with an existing open-pit mine that produced over 10.9mlbs U3O8 between 2009 and 2014.

The sale will allow Paladin to focus solely on the potential restart of its flagship Langer Heinrich mine in Namibia. While uranium prices have seen little improvement since the mine was shut down, pre-feasibility studies are investigating whether the extent of vanadium by-product from uranium mining may tip the balance.

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