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Supply-side constraints and Russian export curbs are just two factors altering the risk/reward outlook for the uranium spot price.
-Russia moves the nuclear export goal post to the USA again
-U308 spot price fall belies higher activity levels
-Will supply side challenges and geo-politics underpin higher U308 prices?
-The uranium stocks in focus
By Danielle Ecuyer
Volatility and uncertainty prevailed last week
On the tails of last week’s Russian announcement to implement retaliatory import restrictions of enriched uranium to the USA, industry consultants TradeTech highlighted Centrus Energy received a notice from Tenex regarding Russia’s cancelation of its license to export low-enriched uranium to the US through to Dec 31, 2025.
The company must now secure a special license to facilitate the remaining low-enriched uranium shipments in 2024 to Centrus and for 2025, with no guarantee the license will be granted.
Further uncertainty was injected into the market with the Russian state nuclear corporation Rosatom confirming ongoing uranium deliveries to all normal customers, which would include Iran, India, and China. US supplies are now under a “special regime”.
A vessel delivering enriched uranium to the US was also delayed this week, offshore from the port of St Petersburg.
On the back of the Russian updates, TradeTech points to buyers entering the U3O8 spot market last Monday, with several deals transacted at US$81/lb for delivery at ConverDyn’s US facility and US$80/lb for delivery at Cameco in Canada.
The Sprott Physical Uranium Trust acquired slightly more than 50,000lbs of U3O8 at US$80.50/lb on Tuesday, with more trading occurring at this price level after the price closed.
TradeTech reports buying interest faded on Wednesday, with one buyer at US$80/lb for 200,000 pounds and another at US$79/lb for 100,000 pounds, both for delivery at ConverDyn.
While Thursday was quiet, sellers offered U3O8 at reduced price levels. Two deals were conducted at US$77.50/lb.
TradeTech’s weekly spot price indicator fell -US$5.50 to US$77.50/lb and was down -US$1 from Nov 21. The Mid-Term U3O8 price indicator is US$84/lb, and the Long-Term price indicator is US$82/lb.
“The decree prohibiting the export of uranium products from Russia to the United States… is an anticipated reciprocal response to the actions of the US authorities,” Rosatom said in a statement. “The decree also establishes a special licensing regime that permits the supply of Russian uranium products to the United States and US customers.”
Unsurprisingly, Russia’s undertaking has underpinned uncertainty in the enrichment market, with TradeTech emphasising the “urgency around the need to fund infrastructure that supports additional enrichment capacity in Europe and the USA.”
The industry consultants highlight moves by Centrus Energy Corp and Orano to expand high-assay low-enriched uranium production capacity.
What are the brokers saying?
Petra Capital weighed into the potential consequences of the Russian export ban, stressing US utilities will need to source alternative supplies. Between 2019-2025, Russia provided around 25% of the US’s enriched uranium supply.
The broker details conversion as the “most complex” aspect of the uranium fuel cycle and representing the current bottleneck. A renewed contracting cycle is seen as likely because of the Russian ban.
Citi recently upgraded its three-month uranium price forecast to US$85/lb with a 12-month target of US$95/lb. Citi has turned tactically neutral and neutral-bullish for U3O8 prices.
The broker also highlights the recent news flow suggests capital will no longer be a constraining factor in the sector or an obstacle for nuclear build-out and commercialisation of new technologies.
Citi assigns a 15% probability to uranium prices averaging US$150/lb in 2025 under a bullish scenario.
RBC Capital Markets also entered the uranium fray last week with an updated assessment for the industry.
This broker expects global uranium requirements to grow by 50%-plus by 2040, with the uranium price forecast to average US$90/lb from 2025-2028 versus the current average of US$80/lb-US$85/lb.
Supply risks from a slower ramp-up in new supply and geopolitical tensions could result in higher uranium prices. RBC envisages a long-term supply deficit into the mid-2030s, which could support higher contracting activity.
Longer-term, the broker believes the deficit will widen starting in the mid-2030s, necessitating a higher incentive price of US$100/lb to encourage the required supply response.
Morgan Stanley observes the tightening of uranium supply from disappointing mine supply guidance, including Orano placing Niger’s only operating mine into care and maintenance, and Russia’s export restrictions to the USA as a catalyst for an improving risk/reward outlook.
This broker notes utility contracting volumes are down -63%. Combined with the above factors and the removal of US election uncertainty, a floor under the spot price is conceivable. Morgan Stanley notes market dynamics may underpin a recovery in the spot price.
Stocks in the news
Paladin Energy ((PDN)) was back in the news following the extension of the national security review of Fission Uranium with a new conclusion date of December 30.
If the Fission Uranium acquisition doesn’t proceed, Canaccord Genuity would lower its target price for Paladin shares to $12 from $15.
Citi has a Buy rating on Paladin with an $11.50 target price (Fission not included).
NextGen Energy ((NXG)) is highlighted by Shaw and Partners, with the company expected to receive a license to construct and operate the Rook uranium project in Canada by early 2025, post a Commission Hearing date. The news follows the Canadian Nuclear Safety Commission’s completion of its technical review.
The broker rates the stock a Buy, High Risk, with a $16.20 target price.
Petra Capital believes Bannerman Energy ((BMN)) offers the best leverage and value on the ASX, with a Buy rating and $4.51 target price. The broker also believes NextGen Energy will be a beneficiary of capital inflows; Buy rated with a $12.15 target price.
Uranium companies listed on the ASX:
| ASX CODE | DATE | LAST PRICE | WEEKLY % MOVE | 52WK HIGH | 52WK LOW | P/E | CONSENSUS TARGET | UPSIDE/DOWNSIDE |
|---|---|---|---|---|---|---|---|---|
| 1AE | 22/11/2024 | 0.0500 |  25.00% |
$0.19 | $0.03 | |||
| AEE | 22/11/2024 | 0.1500 |  – 3.23% |
$0.31 | $0.11 | |||
| AGE | 22/11/2024 | 0.0400 | – 4.76% |
$0.08 | $0.03 | $0.100 | 150.0% |
|
| AKN | 22/11/2024 | 0.0100 | 0.00% | $0.06 | $0.01 | |||
| ASN | 22/11/2024 | 0.0700 | – 1.43% |
$0.17 | $0.06 | |||
| BKY | 22/11/2024 | 0.3900 | 7.58% |
$0.45 | $0.26 | |||
| BMN | 22/11/2024 | 2.8000 | 0.36% |
$4.87 | $1.90 | $7.400 | 164.3% |
|
| BOE | 22/11/2024 | 3.0700 | 0.00% | $6.12 | $2.38 | 19.8 | $4.200 | 36.8% |
| BSN | 22/11/2024 | 0.0200 | -17.86% |
$0.21 | $0.02 | |||
| C29 | 22/11/2024 | 0.1200 | 33.33% |
$0.13 | $0.06 | |||
| CXO | 22/11/2024 | 0.1000 | – 1.02% |
$0.36 | $0.08 | $0.090 | – 10.0% |
|
| CXU | 22/11/2024 | 0.0200 | 0.00% | $0.06 | $0.01 | |||
| DEV | 22/11/2024 | 0.1400 | 31.82% |
$0.45 | $0.10 | |||
| DYL | 22/11/2024 | 1.2900 | 3.69% |
$1.83 | $0.91 | -70.6 | $1.900 | 47.3% |
| EL8 | 22/11/2024 | 0.3100 | 0.00% | $0.68 | $0.26 | |||
| ERA | 22/11/2024 | 0.0030 | -33.33% |
$0.08 | $0.00 | |||
| GLA | 22/11/2024 | 0.0200 | 100.00% |
$0.04 | $0.01 | |||
| GTR | 22/11/2024 | 0.0030 | -25.00% |
$0.02 | $0.00 | |||
| GUE | 22/11/2024 | 0.0600 | 0.00% | $0.18 | $0.05 | |||
| HAR | 22/11/2024 | 0.0500 | 0.00% | $0.28 | $0.03 | |||
| I88 | 22/11/2024 | 0.4800 | 2.22% |
$1.03 | $0.14 | |||
| KOB | 22/11/2024 | 0.0800 | 0.00% | $0.18 | $0.07 | |||
| LAM | 22/11/2024 | 0.8600 | 0.00% | $1.04 | $0.48 | |||
| LOT | 22/11/2024 | 0.2400 | 6.38% |
$0.49 | $0.20 | $0.547 | 127.8% |
|
| MEU | 22/11/2024 | 0.0400 | 0.00% | $0.06 | $0.04 | |||
| NXG | 22/11/2024 | 13.4300 | 11.10% |
$13.66 | $7.89 | $16.200 | 20.6% |
|
| ORP | 22/11/2024 | 0.0400 | 33.33% |
$0.12 | $0.03 | |||
| PDN | 22/11/2024 | 8.4400 | 6.63% |
$17.98 | $6.83 | 42.5 | $12.325 | 46.0% |
| PEN | 22/11/2024 | 0.0600 | 3.45% |
$0.15 | $0.05 | $0.240 | 300.0% |
|
| SLX | 22/11/2024 | 5.9500 | 4.27% |
$6.74 | $3.01 | $7.200 | 21.0% |
|
| TOE | 22/11/2024 | 0.2600 | – 3.57% |
$0.70 | $0.01 | |||
| WCN | 22/11/2024 | 0.0200 | 25.00% |
$0.03 | $0.01 |
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