Uranium Week: Deficit Ahead

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With the bulk of miner restart production already being contracted, increasing demand should lead to a near term uranium supply deficit.

-Spot uranium price creeps back up
-DoE pushes clean energy investment
-Restart supply not enough to cover demand

By Greg Peel

Following the bank-led turmoil of the prior week that had financial markets in a tailspin, the spot uranium price quietly crept back up last week on four transactions. Traders were on the buy-side and traders or speculators were the sellers, industry consultant TradeTech reports.

TradeTech’s weekly spot price indicator has risen US35c to US$50.25/lb. Spot is up 2.6% in 2023 but down -14% year on year.

Meanwhile, term uranium buyers (utilities) are pursuing additional material through a variety of market mechanisms that include formal Requests for Proposal, off-market transactions, and extensions or adjustments to existing contracts.

TradeTech’s tem price indicators remain at US$51.50/lb (mid) and US$53.00/lb (long).

Demand-Side

The US Department of Energy last week launched a series of reports that represent a new department-wide initiative to strengthen engagement between the public and private sectors to accelerate the commercialisation and deployment of key clean energy technologies, TradeTech informs.

The reports, titled “Pathways to Commercial Liftoff,” provide resources on how to gauge the full-scale deployment of technologies such as clean hydrogen, advanced nuclear, and long duration energy storage.

The DoE notes US domestic nuclear capacity has the potential to scale up from about 100GW equivalent today to approximately 300GW by 2050. Cumulative investments must increase from approximately US$40bn to US$300bn across the hydrogen, nuclear, and long duration energy storage sectors by 2030, with continued acceleration until 2050 required to stay on track to realise long-term decarbonisation targets.

Australian stockbroker Bell Potter notes reactor growth continues across the globe, with China and India boasting both a comparatively young fleet and ambitious growth outlooks for nuclear capacity. The broker estimates current raw U3O8 demand at 161mlbs, expanding to 189mlbs by the end of the decade.

Bell Potter currently estimates global supply of U3O8 at around 125mlbs, expanding by 11.48mlbs over 2023 with the addition of restart operations, namely Cameco’s McArthur River.

As it stands, the broker currently estimates a shortfall of around -24mlbs in the market in 2023.

Supply-Side

2023 will see the beginning of a supply response, Bell Potter notes, with the addition of Cameco’s McArthur River, which restarted last November, adding some 10.5mlbs. Australian-listed Boss Energy’s ((BOE)) Honeymoon operation in South Australia should add 0.22mlbs and Australian-listed Peninsula Energy’s ((PEN)) Lance project in Wyoming could potentially contribute a similar amount from the middle of the year.

Bell Potter notes the majority of restart production is contracted for currently, with Cameco’s Energoatom contract representing roughly a quarter of McArthur River capacity. Australian-listed Paladin Energy’s ((PDN)) Langer Heinrich operation in Namibia is largely contracted for 2024 and 2025, and Pensinsula Energy’s Lance project will sell primarily into the US Department of Energy reserve.

The broker sees little in terms of fundamental headwinds for uranium and continues to forecast a deficit over the short-to-medium term supporting increased term contract pricing, with the only real headwind being a resolution of the Ukraine-Russia conflict.

Boss Energy and Paladin Energy are Bell Potter’s top two picks for restart operations. Boss is expecting to restart its Honeymoon mine in December, with the next key catalyst being announcement of binding offtake agreements. Paladin is expecting to restart its globally significant Langer Heinrich mine in the March 2024 quarter.

In the developers/explorers space the broker likes Australian-listed Deep Yellow Ltd ((DYL)) on a valuation basis with two advanced projects, Tumas and Mulga Rock, looking to feed into the market towards the middle/end of the decade.

Uranium companies listed on the ASX:

ASX CODE	DATE	LAST PRICE	WEEKLY % MOVE	52WK HIGH	52WK LOW	P/E	CONSENSUS TARGET	UPSIDE/DOWNSIDE
AGE	27/03/2023	0.0300	3.33%	$0.12	$0.03
BKY	27/03/2023	0.3800	8.57%	$0.58	$0.25
BMN	27/03/2023	1.3200	– 0.76%	$2.49	$0.15
BOE	27/03/2023	2.2000	3.88%	$3.10	$1.61		$3.355	52.5%
DYL	27/03/2023	0.5200	1.94%	$1.25	$0.51		$1.040	100.0%
ERA	27/03/2023	0.2100	0.00%	$0.42	$0.16
LOT	27/03/2023	0.1600	– 3.13%	$0.46	$0.15		$0.350	118.7%
NXG	27/03/2023	5.4700	– 0.18%	$8.99	$0.00
PDN	27/03/2023	0.5700	– 3.48%	$0.97	$0.53	-16.7	$1.097	92.4%
PEN	27/03/2023	0.1300	0.00%	$0.28	$0.12	130.0	$0.340	161.5%
SLX	27/03/2023	3.8000	4.99%	$5.32	$1.18		$5.000	31.6%

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