Uranium prices are in a bull market, having surged almost 40% since the start of the year to US$70 per pound, reaching heights not seen since 2011.
The strong rally in the price of the commodity dubbed 'yellowcake' has put the revival of nuclear power back on the agenda.
Uranium going gangbusters @$70+ doubled in 1yr with global demand now v. strong& supply tightest ever???some ASX/Canadian U3 plays ready for their James Bay sky rocket moment...just in 2022 some were 3x higher than now so with U3 doubled @$70+ upside cld be 10x $BHP $RIO $FMG— GordonGecko (@GGgordonsgin) September 27, 2023
The demand for clean, reliable and low-carbon energy sources has prompted governments worldwide to reconsider nuclear energy as part of their energy portfolios.
This has helped the nuclear energy sector rebound strongly after a stagnant decade following the 2011 Fukushima Daiichi incident.
Currently, 434 nuclear facilities are operational globally, with 59 under construction and 111 further planned.
China leads this resurgence, building 23 new plants to add to its existing 55. This year has also seen a notable increase in announcements for plant restarts, life extensions and new builds.
Nuclear reactors in the world today; Source: World Nuclear Association as of 8/1/2023, Sprott.
Sprott Asset Management (TSX:SII) CEO John Ciampaglia thinks this uranium bull market has much more room to run.
"Uranium stocks are finally starting to outperform the commodity price ... and some of their operating leverage is starting to play out here," Ciampaglia told Proactive in a recent interview.
He noted that historical uranium cycles tended to go six to eight years due to the large capital expenditures involved with those type of projects.
"This cycle to us feels more like a supply story than a demand story and because of that supply issue, we think this particular bull market will last several more years," Ciampaglia added.
Stable energy source
As the demand for energy grows, the transition from fossil fuels to renewable energy is accelerating.
Forecasts suggest that by 2025, renewables will make up 35% of global power generation, a rise from 29% in 2022.
While wind, solar and hydroelectric power often symbolise renewable energy, their reliability can be affected by fluctuating weather conditions.
Consequently, more stable energy sources like nuclear power will become critical for maintaining a consistent baseload supply and keeping economies functioning.
Reactor requirements to double
The World Nuclear Association (WNA) projects global reactor requirements for uranium to nearly double, reaching almost 130,000 tonnes by 2040, up from an estimated 65,650 tonnes this year.
Under the WNA’s upper forecast that total rises to 184,300 tonnes and even under the most conservative forecast, demand would reach 87,000 tonnes in 2040.
From the current 391 gigawatts electricity of operable nuclear plants, the WNA estimates capacity will reach 686 GW by 2040 under its base case scenario.
Looming supply deficit
While demand is set to surge, the International Atomic Energy Agency (IAEA) has expressed concerns over a looming supply deficit.
Primary uranium mine supply is significantly trailing demand, with a cumulative forecasted supply shortfall of about 1.5 billion pounds by 2040.
Even when considering secondary sources such as recycled materials, decommissioned military weapons and re-enriched depleted uranium, the supply is expected to be insufficient.
This has led the nuclear power industry to acknowledge the necessity for increased uranium mining.
Uranium supply and demand estimates 2022-2040; Sources: UxC LLC. Data as of Q2 2023, World Nuclear Association as of 8/1/2023, Sprott.
Opportunities and challenges
Miners are capitalising on the surge in uranium prices. Kazatomprom, the world's leading producer from Kazakhstan, has seen a 21% rise in its share price over the past month.
Meanwhile, its Canadian competitor, Cameco, has enjoyed an 11% share price increase in the same period, despite announcing earlier this month that this year's production will not meet previous estimates.
Uranium equities have outperformed during uranium bull markets. Sources: Bloomberg, TradeTech LLC, Sprott.
The nuclear sector is not without risks. Political instability, especially in key uranium-producing nations such as Russia and Kazakhstan, poses a threat to supply.
One of Cameco’s main sources of non-Canadian supply is Kazakhstan, where it has a joint venture with Kazatomprom.
Most Kazakh uranium reaches the Western market by travelling through Russia by train before setting sail from St Petersburg. Cameco shunned that route after Russia’s full-scale invasion of Ukraine in 2022.
Delays have hindered the alternative route, which wends across the Caspian Sea, through Azerbaijan and Georgia and out via the Black Sea, where Russian and Ukraine have recently traded strikes.
Russia controls a significant amount of uranium supply; Source: World Nuclear Association as of 12/31/2022, Sprott.
In the spotlight: uranium stocks
The growing reliance on nuclear energy is increasing the demand for uranium and this provides attractive opportunities for uranium miners.
After decades of overproducing, uranium miners can no longer meet the demand from existing nuclear reactors and the uranium production/demand imbalance is expected to widen in the next decade.
Let’s look at some of the uranium explorers and developers making moves in the market.
GTI Energy Ltd (ASX:GTR, OTC:GTRIF) declared the maiden uranium resource in July for the Lo Herma Project in Wyoming’s prolific Powder River Basin uranium production district.
The mineral resource estimate (MRE) assumes mining by in-situ recovery (ISR) methods and is reported at a cut-off grade of 200 ppm U3O8 (triuranium octoxide) and a minimum grade thickness (GT) of 0.2 per mineralised horizon as:
4.12 million tonnes of mineralisation at an average grade of 630 ppm U3O8 for 5.71 million pounds (Mlbs) of U3O8 contained metal.
Lo Herma is ~10 miles from the US’s largest ISR U3O8 production plant at Cameco Corporation (TSX:CCO)’s Smith Ranch-Hyland and ~60 miles from Uranium Energy Corp’s Irigaray and Energy Fuels Inc’s Reno Creek.
A revised production plan on the Ross & Kendrick production areas within Peninsula Energy Ltd (ASX:PEN, OTCQB:PENMF) and subsidiary Strata Energy Inc’s 100%-owned flagship Lance Projects in Wyoming, USA, is complete and has production restarting in late 2024.
The revised strategy positions Peninsula as a fully independent, end-to-end producer of dry yellowcake, while delivering a robust and resilient project development plan for Lance, including an accelerated production ramp-up schedule.
With this approach, PEN aims to bypass third-party processing vulnerabilities, noting that the new Ross & Kendrick Life of Mine (LoM) model features a complete 5,000 GPM uranium ISR plant, to produce up to 2.0 million pounds per annum of dry yellowcake (U3O8) product.
In addition to securing operational resilience through an updated LoM model, Lance's revised production strategy also highlights a cost-effective approach. The plan maintains a competitive estimate for C1 direct operating costs at US$21.69 per pound.
Aura Energy Ltd (ASX:AEE, AIM:AURA) recently projected a post-tax net present value of US$380 million to US$1.23 billion and a post-tax internal rate of return of 26% to 47% in a scoping study for the Häggån critical minerals project in Sweden.
The study signals the scale and optionality of the project in a country that recently unveiled plans to lift a ban on uranium mining, paving the way for an expanded nuclear energy capacity.
The 65-million-tonne scoping study covers less than 3% of Häggån’s MRE and identifies vanadium, potash, nickel, molybdenum, zinc and uranium as among the key commodities.
Alligator Energy Ltd (ASX:AGE) is a uranium and energy metals project development and exploration group with clear pathways for approval and development through its multi-jurisdictional portfolio.
The company is preparing for the next step at its Samphire Uranium Project in South Australia by applying to the SA Department for Energy and Mining (DEM) for a retention lease to conduct a pilot field recovery trial.
Alligator is proposing to undertake a short-term small-scale field recovery trial in early 2024 for around three months to test the use of the ISR method for the project.
ISR is a method used in about 55% of the world’s uranium production and has been used safely at other uranium mines in northeast South Australia since 1998.
Cauldron Energy Ltd (ASX:CXU)’s Yanrey Uranium Project near Onslow in WA is host to the Bennett Well Uranium Deposit which has a resource of 30.9 million pounds (13,990 tonnes) of contained uranium oxide.
Although the development of this large uranium deposit is hindered by the current WA uranium policy, Cauldron CEO Jonathan Fisher told Proactive that the company has a project that could be progressed and developed quite quickly, as soon as that policy lifts.
Fisher added: “We still have a long way to run when we compare where we are to our peers - we should be multiples higher, and hopefully the market will get to understand it.
“There's a perfect storm of factors that are driving spot uranium prices at the moment. Obviously, the demand curve for uranium is very robust and nuclear is now considered green around the world. It is an indispensable tool to hit net zero.”
Earlier this month, Terra Uranium Ltd (ASX:T92) marked a major milestone by confirming the presence of uranium mineralisation with a peak grade of 32.5 parts per million over 0.2 metres in diamond drilling at its Parker Project in Canada's Athabasca Basin.
Assays from the diamond drill hole outline uranium mineralisation in an altered and fractured zone in the basement as suggested by earlier reported downhole gamma radioactivity logs.
Notably, the 10 metres of sandstone immediately above the unconformity shows alteration and structural features associated with uranium deposition at other known deposits in the basin.
The Parker Project is about 50 kilometres west of Cigar Lake and 50 kilometres northwest of McArthur River, the world’s largest and highest-grade uranium mines, operated by Cameco.
Aurora Energy Metals Ltd (ASX:1AE) is advancing the scoping study on its Aurora Energy Metals Project in Oregon, USA which hosts the USA’s largest, mineable, measured and indicated uranium deposit (107.3 million tonnes at 214ppm uranium oxide for 50.6 million pounds of contained uranium).
Aurora managing director Greg Cochran recently talked to Proactive about the run-up in uranium prices and how countries were starting to embrace nuclear power.
He said: “You know, the hysteria around Fukushima, was not surprising, but it was nonetheless still disappointing. Because the reality is that nuclear power is still the safest form of electricity generation on the planet. No matter how you measure it, it is also the cleanest form of electricity generation. And there's plenty of statistics to back up those facts as opposed to claims.”
Cochran also said that the company had a clear pathway to development for the Aurora Energy Metals Project.
“We're aiming to complete the scoping study by the end of the year or in Q1 next year, and then go straight into a pre-feasibility study and wrap that up by the end of next year,” Cochran added.
Hampered by wet weather earlier in the year and access to drilling equipment, AuKing Mining Ltd (ASX:AKN) finally kicked off the planned exploration last month at its Mkuju Uranium Project in southern Tanzania.
The initial 3,000-metre drilling and associated soil sampling program will target parts of a large radiometric anomalous zone adjacent to the world-class Russian-owned Nyota Uranium Project.
AuKing holds six contiguous prospecting licences (PLs) and one near-granted PL application covering 730 square kilometres in the Mkuju region, about 470 kilometres southwest of Dar es Salaam.
The program will take two months to complete, during which the company plans to collect 400 soil samples as well as drill 150 auger holes with an estimated average depth of 20 metres per hole.