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Uranium Week: Kazatomprom’s New Fund

Weekly Reports | Oct 19 2021

After last week’s 23% rise in the weekly spot uranium price, Kazatomprom begins the new week by announcing the establishment of a new physical uranium fund.

-Kazatomprom to hold uranium as a long-term investment in a new fund
-France to spend -US$1.2bn on a new-generation of small modular reactors
-Utilities expected to enter the uranium market over next 12 months
-ASX-listed Lotus Resources makes highly-accretive acquisition
-Uranium spot price rises 23% for the week

By Mark Woodruff

Kazatomprom, the world's largest producer of uranium, has announced it will participate in a physical uranium fund that will hold uranium as a long-term investment.

The fund, named ANU Energy, will be part of Kazatomprom’s broader value-focused strategy and will be the first to provide potential direct access for emerging market investors

It will be established on the Astana International Financial Centre (AIFC), a financial hub for regions including Central Asia, the Caucasus, the Middle East, West China, Mongolia and Europe. As such, the fund may appeal to investors looking to diversify away from existing US dollar/British pound denominated funds.

Kazatomprom will initially have 48.5% ownership of the fund, as will the National Investment Corporation of the National Bank of Kazakhstan (NIC). The balance will be held by the fund manager Genchi Global Limited.

Initial uranium purchases will be financed through the founders’ round investment totaling US$50m. A second stage of development is expected to be carried out through an additional public or private offering of up to US$500m, with the proceeds to be used for additional uranium purchases. 

Country news  

President Emmanuel Macron said last week that France would work to become a leader in green hydrogen by 2030, and build new, smaller nuclear reactors.

Macron unveiled a five-year investment plan calling for an investment of -US$1.2bn to create a new-generation of small modular reactors (SMRs). They are seen as cheaper to build than conventional nuclear plants and provide enhanced safety features.

Broker research 

In research out last week, Shaw and Partners expects US and European utilities to enter the uranium market in a big way over the coming 12 months, as approximately 35% of their 2024 demand requirements are uncovered by contracts. 

Given there is a two/three year upfront contract lock-in period, it’s thought utilities will have to act soon, as stockpiles are not inexhaustible.

Despite the positive Australian sector performance of 350% since issuing a November, 2020 sector report, the broker remains positive on a multi-year horizon. This view is based on a past decade of underinvestment and longer-term demand supported by increased electrification and decarbonisation.

Company news

ASX-listed Lotus Resources last week announced the acquisition of the Livingstonia Uranium project, 90 km from the company’s Kayelekera Uranium project in Malawi.

Managing Director Keith Bowes describes the transaction as “extremely accretive with the potential to increase our global mineral resource by 16% for less than US$.004/lb.”

Uranium pricing

TradeTech's Weekly Spot Price Indicator ended last week at US$46/lb, up US$8.60/lb from the prior week. The 23% jump is the largest week-on-week price increase in the history of the Indicator.

The Indicator is up 51% in 2021 and is 68% above the 2021 low point of US$27.40/lb. The average weekly spot price in 2021 is US$32.71/lb, US$3/lb above the 2020 average.

Buyer activity was led by financials, but producers, traders, and other intermediaries were also active, according to TradeTech.

A total of 21 transactions, involving over 2.9mlbs U3O8 equivalent, were reported for the week. 

The Sprott Physical Uranium Trust (SPUT) purchased nearly 2.1mlbs last week, and has accounted for a significant proportion of spot buying since it was launched in mid-August.

The Trust has purchased over 14mlbs, averaging just under 350,000lbs per day since August 18. Including inventory accumulated by Uranium Participation Corp, the company taken over by SPUT, the Trust now holds over 32mlbs in total.

TradeTech's term price indicators are US$43.75/lb (mid) and US$45/lb (long).

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