Uranium Week: Multiple Tailwinds For Uranium

Weekly Reports | Feb 16 2021

While the uranium spot price continues to move in a tight range, Cameco remains positive about long-term fundamentals for the uranium market.

-Demand for uranium is rising just as supply becomes uncertain
-The US returns to uranium conversion industry after five–year hiatus

-Uranium spot price falls marginally

By Mark Woodruff

Speaking at the company’s year-end results presentation, President and CEO of Cameco, Tim Gitzel, remained positive about the long-term fundamentals in the uranium market.

He noted momentum is building towards non-traditional nuclear, such as small modular reactors and advanced reactors as well as recognition of nuclear energy's role in the production of low-carbon energy for the production of hydrogen and desalination.

This is occurring as countries and companies around the world are making net-zero commitments. This includes the US, where the new administration has expressed support for maintaining the existing domestic nuclear power fleet and the construction of advanced reactors, as well as recommitting to the Paris Agreement.

Also, "demand for uranium is rising at precisely the same time that supply is becoming less certain. We know that utilities have not been replacing what they consume annually under long-term contracts," Gitzel said. "This has led to a growing wedge of uncovered uranium requirements."

Citing data from market research company UXC, he said “the base case projects an annual shortfall of almost 100m lbs by 2035. That means the world needs to discover, develop and commission about six McArthur Rivers or Cigar Lakes in the next 15 years. Given the timelines it takes, we should be investing now.”

Regarding Cameco’s operational performance, Gitzel explained production at Cigar Lake mine remains suspended with “lots of question marks” regarding the timeframe for recommencement. The suspension is due to uncertainties about access to qualified operational personnel caused by the pandemic and a commitment to protecting the health and safety of workers, their families and the broader community. 

Gitzel insisted that they don’t want to “yoyo” production at Cigar Lake by risking a premature recommencement of operations. He noted they were waiting for the vaccine rollout whilst maintaining close contact with the public health authorities and indigenous community leaders. 

Due to precautionary production suspensions at its operations, Cameco produced only a 5mlbs in 2020. Gitzel noted that it was too early to say if there would be an impact on 2022 production guidance at Cigar Lake. Should the Canadian vaccine be a pre-requisite for restarting Cigar Lake, recommencement may be delayed well into 2021.

Company News

Honeywell said this week it would begin preparing to reopen its uranium hexafluoride (UF6) conversion plant, the Metropolis Works Facility (MTW), in Metropolis, Illinois.

Restart work will begin this year and production will restart in early 2023, which will mark the US's return to the uranium conversion industry after a five-year hiatus. In January 2017, the company laid off some of its employees in Metropolis due to significant challenges of the nuclear industry globally and the oversupply of UF6, explains industry consultant TradeTech.

This decision is expected to be positive for the uranium sector, as utilities can now clarify their forward conversion contracts before procuring the uranium to be delivered to the converters.

Australian-listed Bannerman Resources ((BMN)) last week announced the raising of $12m via a placement of shares at 10.5 cents. The funds are to be used to complete a pre-feasibilty study at the th company's Etango-8 uranium project in Namibia, with sufficient funding to then undertake and complete a definitive feasibility study. Additionally, funds will be deployed for general working capital and corporate purposes, including financing and off-take initiatives.

Among the investors taking part in the placement was a specialist uranium investor in Tribecca Investment Partners, which provided cornerstone support. FNArena understands the raising was very heavily oversubscribed by both institutional investors and private clients.

As the raising was the first to be undertaken by an Australian uranium company in 2021, it provides a useful insight into uranium investor sentiment.

Uranium Pricing

TradeTech's Weekly Spot Price Indicator is US$29.35/lb, down -US$0.20 from last week’s Indicator.

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