Weekly Reports | Mar 02 2021
As the uranium spot price continues to decline there are emerging signs of potential future demand.
-Signs of positive uranium sentiment
-Potential future demand on the spot market
-Uranium spot price declines -16% in last seven weeks
By Mark Woodruff
Physical uranium investment vehicle Yellowcake plc has announced the exercise of an option to buy US$100m worth of uranium from Kazatomprom.
This comes as the company raised US$140m from an oversubscribed placement to existing and new institutional shareholders. This will fund the purchase of 3.5m lbs U3O8 at a price of US$28.95/lb, bringing Yellowcake’s total sequestered uranium holding to 12.8mlbs.
Industry consultant TradeTech believes Yellowcake’s decision is a reflection of the growing sentiment in the investment community that the uranium market represents an undervalued asset.
This is especially so in light of the attention that decarbonisation efforts are receiving and the recognition across countries and policy makers that nuclear energy must be a part of the equation if the world is to meet its goal of reducing CO2 emissions.
Kazatomprom will need to deliver the uranium from its producer inventory, which is already below target levels as a result of honouring 2020 sales commitments, despite Kazakh production being down -15% on guidance due to covid impacts.
Uranium market expert, Brandon Munro, told FNArena “Kazatomprom’s 2021 guidance shows an intention to sell all of its 2021 production. So with supply risk to the downside from continued impacts of 2020 disruption, the company will need to replenish its low inventory from other sources. “
With most of the company’s joint venture partners already under pressure from their own covid supply disruption, he expects deliveries to Yellowcake will ultimately need to be re-bought on-market.
Mr Munro commented “This will provide a reason for other players to secure product from the spot market sooner rather than later, which is likely to support a reversal of the current downward trend.”
TradeTech's Weekly Spot Price Indicator is US$27.75/lb, down -US$0.50 from last week’s Indicator.