Uranium Week: Prices Hit Nine Year High

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As the weekly spot price hits a nine year high, industry consultant TradeTech expects further upward price pressure.

-Spot price increases 53% over the last four weeks
-New broker research on Silex Systems 
-Uranium spot price rises over 18% for the week

By Mark Woodruff

For the first time since July 2012 the uranium market has seen a spot price surpass the US$50/lb price level.

The Weekly Spot Price Indicator calculated by industry consultant TradeTech rose to US$50.50/lb last week, up US$8.00/lb from the week before. The Indicator has risen 53% over the last four weeks and currently sits 84% above its 2021 low point of US$27.40 set in mid-March. 

The average Weekly Spot Price Indicator in 2021 is US$31.71/lb, US$2.00/lb above the 2020 average.

A total of nearly 4.7mlbs U3O8 traded hands last week, up from 3.8mlbs in the prior week, with the Sprott Physical Uranium Trust (SPUT) accounting for approximately 75% of purchases.

TradeTech expects further upward price pressure as SPUT alone has taken approximately 10mlbs out of active spot supply. Sellers are cautiously raising offer prices, while also ensuring they lock in some business at current prices.

TradeTech draws a comparison between the lithium and uranium markets. They both endured a steep price decline from oversupply and prices that stabilised for a time below the cost of new and returning production. Now, investors foresee a protracted supply deficit in the face of increasing demand.

TradeTech's term price indicators are US$35.75/lb (mid) and US$35.00/lb (long).

The increase in the spot uranium price is impacting upon those term uranium contracts with a market-related component, which incorporate the spot price at the time of delivery.

As a result, some utilities are faced with an unexpected increase in their projected fuel costs and cash flow. According to TradeTech, a few utilities are fast-tracking their off-market discussions with suppliers in order to lock in additional quantities while the term uranium price still lags behind the spot uranium price.

Silex Systems

Last week Shaw and Partners initiated coverage on ASX-listed Silex Systems ((SLX)) with a Buy rating and price target of $2.60. The company is focused on the development and commercialisation of its SILEX laser isotope separation technology. 

The primary commercial application of the technology is the production of fuel for the nuclear power industry, which is licensed exclusively to Global Laser Enrichment (GLE), a business venture comprising Silex Systems (51%) and Cameco (49%).

The Paducah Laser Enrichment Facility (PLEF), situated in Kentucky, will be capable of producing around 5mlbs of uranium annually for circa 30 years via the enrichment of depleted uranium tails supplied by the US Department of Energy. 

The broker forecasts production in 2029 after first attaining proof of commercialisation in 2025 and then a Final Investment Decision in 2027.

Shaw recently upgraded its long-term uranium price to US$60/lb by 2028, up from US$52/lb. An incentive price environment for re-investment to occur is assumed and a multi-year price spike to US$85/lb is forecast, before settling back to the US60/lb level.

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