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Uranium Week: Spot Price Retraces From Highs

Weekly Reports | Sep 28 2021

This story features 92 ENERGY LIMITED, and other companies. For more info SHARE ANALYSIS: 92E

As the weekly spot uranium price has its first fall in six weeks, upward projections are made to potential growth of world nuclear capacity.

-Potential for nuclear power capacity to double by 2050
-Two ASX-listed companies in the news 
-Uranium spot price falls nearly -13% for the week

By Mark Woodruff

For the first time since Fukushima a decade ago, the International Atomic Energy Agency (IAEA) has revised up its projections for the potential growth of world nuclear power capacity in the coming decades. 

Under the bullish scenario, the IAEA now expects capacity to double to 792GW by 2050. Reaching that goal would require significant effort, including an accelerated implementation of innovative nuclear technologies. Compared with the previous year’s high case projection of 715GW by 2050, the estimate has been revised up by just over 10%.

The low case projections indicate that world nuclear capacity by 2050 would remain essentially unchanged at 392GW.

Also, the head of the IAEA also has joined with thirteen global nuclear industry CEOs to form the Group of Vienna. The aim is to advance the case for nuclear energy in addressing climate change and to advance sustainable development.

The group will support the IAEA in its mission to accelerate and enlarge the contribution of nuclear technologies to meeting environmental, social, and economic objectives and to improve the health and well-being of the population.

Company news

Canadian-focused ASX-listed exploration company 92 Energy ((92E)) last week announced the discovery of a new zone of uranium mineralisation on its 100% owned Gemini Project in the Athabasca Basin, Saskatchewan.

The Athabasca Basin has some of the largest and highest grade uranium deposits in the world, including Cameco's Cigar Lake and McArthur River mines. The company has a 100% interest in its 28 mineral claims in the area.

As mentioned in last week’s article, Shaw and Partners initiated coverage on ASX-listed Silex Systems ((SLX)) with a Buy rating and price target of $2.60. On Monday September 27, the company announced the completion of a $33m placement at $1.27 per share.

The funds will primarily be used to advance the SILEX uranium enrichment pilot demonstration project in the US. This is focused on Global Laser Enrichment, a business venture comprising Silex Systems (51%) and Cameco (49%).

Uranium pricing

TradeTech's Weekly Spot Price Indicator is down -US$6.40/lb from last week to US$44.10/lb — a decline of nearly -13%. It’s the first fall in six weeks and equals the third-largest decline in percentage terms in the Indicator's history. 

The Indicator is up nearly 45% since mid-August, and is over 60% above the 2021 low point of US$27.40/lb. The average weekly Spot Price, calculated by TradeTech, is US$32.03/lb in 2021, US$2.32/lb above the 2020 average.

Significant volatility over the last six weeks has pushed TradeTech's annualised volatility value to a historical high. China’s Evergrande has had an effect on broader equity markets (including uranium and all other metals) though no specific impact on uranium/nuclear power.

The property developer’s prospects and impact on China's economic health remain uncertain as future debt payments loom. Share prices were down over -10% for most uranium-focused equities last week.

Activity in the spot uranium market stalled with a total of 1.2mlbs U3O8 purchased last week compared to over 4.7mlbs for the prior week. Buyers included utilities, producers, traders and financial entities.

TradeTech's term price indicators are US$35.75/lb (mid) and US$35/lb (long).

The previous run-up in the spot price has prompted a number of utilities to examine their contract portfolios to determine when they should enter the term uranium market, according to TradeTech. 

The majority of utilities are well covered for the next several years. However, the increase in the spot uranium price is having a direct effect on those holding term uranium contracts with a market-related component, with many having already reached the ceiling price for the market-related component.

Thus, several 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.

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