Weekly Reports | Feb 06 2024
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The spot uranium price has surged again on news Kazakhstan’s major producer will miss its production targets.
-Kazatomprom production guidance cut
-Spot and term uranium prices continue to rise
-Uncertainty surrounds the US, Niger and the Red Sea
By Greg Peel
The spot uranium price surged last week on confirmation from Kazatomprom it would likely miss its early targets for production in 2024 and 2025 due to challenges with sulphuric acid deliveries and well field development.
Guidance for 2024 has been cut by -13%, with 2025 uncertain.
The cut increases Morgan Stanley’s forecast 2024 global production deficit estimate by 50% to -9600t U3O8. Morgan Stanley’s bull case forecast is for a spot uranium average price of US$119/lb over 2024.
While this news was not unexpected, industry consultant TradeTech notes, the revised guidance caused sellers to immediately raise their offer prices. Buyers were not deterred by the higher prices and have continued to step in to absorb material.
TradeTech’s weekly spot price indicator rose US$7.00 to US$107.00/lb, putting it within US$31 of the historical peak at US$136/138/lb marked in mid-2007.
Uncertainty
The willingness of buyers to step in at these price levels is bolstered not only by the news from Kazatomprom but is rooted in the uncertainty that surrounds the entire nuclear fuel supply chain as a result of legislative and geopolitical concerns affecting various uranium-producing regions, TradeTech reports.
The market continues to monitor the US Senate for any signs a bill banning Russian uranium imports, already passed by the House, will progress.
It is noted BHP Group ((BHP)) has stopped transporting uranium exports through the Red Sea, and is going around the long way, significantly adding to the cost.
The market is also watching Niger, post-coup, where reports have emerged the country temporarily suspended the granting of new mining licenses, the first step in an audit of its mining sector as it seeks to boost government revenue.
January
The Kazatomprom announcement came on February 1. As at January 31, TradeTech’s spot price indicator had risen to US$100.50/lb, up from US$91.00/lb at end-December.
The same dynamics that have created upward price pressure in the spot uranium market are at play in the term uranium market. Developments in US Congress, along with lowered guidance from major uranium producers Kazatomprom and Cameco, have been added to the list of ongoing factors that are placing strain on the supply side of the market.
Over the course of January, notes TradeTech, not only did sellers increase the base price in term uranium offers, but they also made significant adjustments to the terms and conditions offered, including much higher floor and ceiling prices in offers containing a market-related component.
TradeTech’s mid-term price indicator has risen to US$103/lb from US$93/lb a month ago, and its long-term indicator has risen to US$72/lb from US$68/lb.
Over that period, TradeTech’s estimated cost of new production has risen to US$56.70/lb from US$55.40.
From the horse’s mouth
Writing earlier in January, John Ciampaglia, CEO of Sprott Asset Management, suggested:
“I often refer to the period from 2011 to 2020 as the lost decade for uranium and nuclear energy. A prolonged bear market spawns legacy issues that take years to form and solving them often takes an equal amount of time. This lost decade impacted the whole sector from the building of nuclear power stations to the mining and processing of uranium, and the nuclear fuel supply chain.
“It is a big challenge, yet an even bigger opportunity. If we want to expand our nuclear capacity over the coming decades, we are going to need to produce a tremendous amount of uranium.”
Note that the Sprott Physical Uranium Trust has been the biggest speculative buyer of uranium over the past few years.
Uranium companies listed on the ASX:
| ASX CODE | DATE | LAST PRICE | WEEKLY % MOVE | 52WK HIGH | 52WK LOW | P/E | CONSENSUS TARGET | UPSIDE/DOWNSIDE |
|---|---|---|---|---|---|---|---|---|
| 1AE | 05/02/2024 | 0.1400 | 0.00% | $0.18 | $0.05 | |||
| AGE | 05/02/2024 | 0.0800 |  11.43% |
$0.08 | $0.03 | $0.100 | 25.0% |
|
| BKY | 05/02/2024 | 0.3000 |  – 3.17% |
$0.80 | $0.26 | |||
| BMN | 05/02/2024 | 3.6000 | 1.39% |
$3.79 | $1.19 | $7.040 | 95.6% |
|
| BOE | 05/02/2024 | 5.9600 | 10.60% |
$6.12 | $2.02 | 211.8 | $5.720 | – 4.0% |
| DYL | 05/02/2024 | 1.5900 | 14.59% |
$1.76 | $0.48 | $1.640 | 3.1% |
|
| EL8 | 05/02/2024 | 0.6400 | 14.04% |
$0.68 | $0.27 | |||
| ERA | 05/02/2024 | 0.0600 | 5.36% |
$0.26 | $0.03 | |||
| LOT | 05/02/2024 | 0.3500 | 0.00% | $0.38 | $0.15 | $0.720 | 105.7% |
|
| NXG | 05/02/2024 | 12.5000 | 12.19% |
$12.90 | $5.11 | |||
| PDN | 05/02/2024 | 1.3700 | 9.20% |
$1.39 | $0.52 | 535.0 | $1.513 | 10.4% |
| PEN | 05/02/2024 | 0.1300 | 21.74% |
$0.20 | $0.08 | $0.340 | 161.5% |
|
| SLX | 05/02/2024 | 5.0000 | 1.20% |
$5.39 | $2.92 | $7.600 | 52.0% |
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