Weekly Reports | Jul 27 2021
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As the uranium spot price rose marginally last week, buyers and sellers were hopeful the listing of the Sprott Physical Uranium Trust would introduce additional demand into the spot uranium market.
-Sprott Physical Uranium Trust listed in Canada
-Utilities looking to incorporate ESG-compliant uranium suppliers
-BHP Group reports uranium production
-Uranium spot price rises by less than 1% for the week
By Mark Woodruff
On July 19, Uranium Participation Corporation (UPC) was formerly restructured as Sprott Physical Uranium Trust (SPUT) and relisted on the Toronto stock exchange with a net asset value of US$497.8m, based on uranium holdings of 18.2mlbs.
This drew significant interest from both buyers and sellers in the uranium market, due to the possibility the Trust could introduce additional demand into the spot uranium market, explains industry consultant TradeTech.
Importantly, this arrangement is a requirement for fund listings on the New York stock exchange, a move planned by Sprott Asset Management that would open SPUT to a wider market. In particular, a US listing would gain the attention of US investors who wish to invest under US regulations or limit exposure to the Canadian dollar.
The asset manager points out SPUT will increase the frequency of its reporting, and will publish its net asset value on a daily basis. The link to follow the NAV is https://sprott.com/investment-strategies/physical-commodity-funds/uranium/ The tickers to follow the trust's share price on the Toronto exchange are U.U in US dollars and U.UN in Canadian dollars.
One of the key developments of this transaction is SPUT’s future ability to utilise an at-the-market facility. This is a mechanism that allows listed entities to raise funds without engaging in a formal equity offering. It is a process that will allow the trust to incrementally sell shares as and when demand arises, points out TradeTech.
Although Sprott’s client base is dominated by institutional investors, it hopes SPUT will provide an attractive route for retail investors to get involved.
The investment manager currently has an established position within the commodity markets with four physical funds covering precious metals, and particularly “Bullion Trusts” for gold, silver, platinum and palladium.
ASX-listed BHP Group ((BHP)) reported uranium production of 1.35mlbs for its fourth quarter ended June 30, down -26% from the previous quarter and -40% below output in the same quarter a year ago.
For the full year ended June 30, production totalled 7.2mlbs, which was down -11% compared to FY20.
Sales for FY21 totalled 7.81mlbs, down -14% compared to FY20. The company produces uranium as a by-product at its Olympic Dam operation in South Australia.
TradeTech Weekly Spot Price Indicator rose US20c to US$32.50/lb last week.
The Indicator has shown little volatility over the last eight weeks, and has shown notable stability since reaching a high mark of US$32.70/lb earlier this month. It has increased nearly 7% so far in 2021, yet stands -1% below its value from one year ago.
The average Weekly Spot Price Indicator in 2021 is US$30.38/lb, US$0.67 above the 2020 average.
Buying activity was muted last week, according to TradeTech, with four transactions involving just over 800,000lbs U3O8 equivalent.
In many cases, utilities are looking to incorporate additional diversity into portfolios, with a view toward enhancing their security of supply and encouraging depth of competition in the supplier pool for the future, notes TradeTech.
Also, important to a growing number of utilities is the desire to incorporate ESG-compliant suppliers into their supply portfolio and/or capitalise on potential opportunities from amending an existing contract commitment.
TradeTech's term price indicators are US$32.40/lb (mid) and US$35/lb (long).
In the term uranium market, demand remains strong with a number of utilities evaluating potential purchases.
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