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Uranium Week: Upside For Demand And Supply

Weekly Reports | Feb 15 2022

Cameco will restart furloughed production, at a slower rate, while European taxonomy has Macron eyeing off a swathe of new reactors.

-Cameco to restart McArthur River
-Macron wants to build 14 reactors
-SPUT piles back into the uranium spot market

By Greg Peel

Canada’s Cameco reported December quarter earnings last week, and revealed a new “supply discipline”, industry consultant TradeTech reports.

The uranium miner’s McArthur River mine and Key Lake Mill, previously furloughed due to weak uranium prices and then covid, will restart production/processing in 2024 targeting 15mlbs annual U3O8 output. However 15mlbs is -40% below licensed capacity.

Production at Cameco’s Cigar Lake mine will at the same time be reduced to an annual 13.5mlbs, or -25% below capacity. The net result is group production -33% below capacity.

The intention is to extend the life of Cigar Lake, in a time of an unbalanced uranium market, and to postpone the need for new projects in Saskatchewan.

Note that the world’s largest producer, Kazakhstan’s Kazatomprom, has also been producing at below capacity these past few years, and to date continues to do so.

Demand ramps up

Two weeks ago, the European Commission’s Taxonomy Complementary Climate Delegated Act deemed both nuclear and gas-fired power generation to be “sustainable” over the global energy transition period away from fossil fuels.

Not “green” per se, but green enough by comparison to get us to the other side.

Last week a rather busy French president declared his support for significant new build activities, stating that France should build 14 new nuclear reactors as the nation moves away from fossil fuels.

No mention of gas-fired plants, presumably given France’s gas imports cannot currently be relied upon.

Back in Force

The driving force behind a 47% increase in the spot uranium price year on year has been financial speculation, most notably by the Sprott Physical Uranium Trust. But having driven prices higher earlier in 2022, financial market volatility that followed the Fed’s sudden shift in monetary policy stance drove the SPUT to step away from the market for the time being.

If anything, speculation and concern over the Fed’s intentions has only intensified in the meantime, but the SPUT decided to come barrelling back into the spot market last week to purchase 1mbls U3O8.

This reignited interest in a market that had taken a hiatus as financial volatility had played out, with TradeTech reporting a big jump in volume last week from the weeks before to 1.5mlbs over 12 transactions.

That’s one transaction of 1mlbs and 11 making up 500,000/lbs.

Everyone was in buying, except utilities. Utilities are nonetheless active in the terms markets, TradeTech reports, currently evaluating offers on delivery contracts, as high inflation and geopolitical unrest stir up urgency with regard supply security.

Trade Tech’s weekly spot price indicator rose US30c to US$43.25/lb last week. Term price indicators remain at US$44.50/lb (mid) and US$45.25/lb (long).

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