Uranium Week: Uranium Equities Spike

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As the spot uranium price has declined nearly -11% in the last month, prices for uranium shares have risen dramatically.

-Key drivers of uranium equities rally
-Three megatrends supporting uranium
-Spot uranium slides over -7% during 2021

By Mark Woodruff

A sweeping rise in the share prices of current and prospective uranium producers has drawn widespread attention in 2021. 

Share prices for a selection of uranium companies tabled weekly by industry consultant TradeTech have all increased over the last four months, some doubling or tripling in that time.

Given the wide variation of assets, production histories and marketing strategies relating to those companies, TradeTech identifies a few key drivers for the share rally.

Firstly, there are supply/demand fundamentals as primary production has been significantly curtailed over the last few years. In addition, some investors believe select companies were undervalued, even in an environment where prevailing prices were below the cost of production for most. 

Institutional and retail investors have also directed capital toward clean energy projects, including many related to nuclear power. This has been guided by Environmental, Social, and Corporate Governance (ESG) principles, combined with a policy outlook that foresees greater progress in mitigating climate change.

The above share price drivers tally with additional details published this week by investment management firm Shaw and Partners from a recent uranium conference.

Keynote speaker Brandon Munro listed various thematics for the uranium sector including commitments to carbon neutral by leading economies and the electrification of everything, which requires a greater input from nuclear.

Mr Munro, the Chair of the World Nuclear Association nuclear fuel demand working group, also noted the Chinese shift towards technology and a greener economy.

There is also strong interest in small and simpler SMR reactors for generating electricity from nuclear power and for other applications including processing heat and hot electrolysis to produce green hydrogen.

Mr Munro explained that all the supportive thematics were driven by the three megatrends of our time: climate mitigation, expansionary monetary policy and geopolitical tension.

Company news 

A long-running saga is finally over for Cameco with the rejection of the Canada Revenue Agency (CRA) tax appeal.

The Supreme Court of Canada has turned down a request by CRA, which asked the court to hear an appeal regarding Cameco and its use of a foreign subsidiary to sell and trade its uranium.

The dismissal means that the dispute for the 2003, 2005, and 2006 tax years is fully and finally resolved in Cameco’s favor, the company announced on February 18.

ASX-listed Deep Yellow ((DYL)) last week conducted a successful placement to raise $40.8m at $0.65 per share. An additional $2m will be raised via a share purchase plan at the same price.

The funds will be applied to the completion of the Tumas pre-feasibility study, ongoing exploration and advancing targeted M&A opportunities.

The funds raised considerably strengthen the balance sheet with a pro-forma cash balance of $50m.

Uranium Pricing

TradeTech's Weekly Spot Price Indicator is US$28.25/lb, down -US$1.10 from last week’s Indicator.

The weekly spot uranium price has declined nearly -11% in the last month, decreasing over -7% in 2021 and down -14% from a year ago. 

The average weekly uranium spot price in 2021 is US$29.71/lb, matching the 2020 average.

The spot uranium market recorded 1.2m lbs U3O8 in nine transactions for the week, with just over 1.1m lbs involving delivery at ConverDyn. Buyers included a number of utilities, traders, and intermediaries.

Last week, ConverDyn parent company Honeywell announced it was moving toward restart of the Metropolis Works Facility (MTW) with a target date of early 2023. The shutdown of the facility, along with Cameco's need to actively buy in the spot market due to the shutdown of its McArthur River and Cigar Lake Mines, had a distorting effect. 

The market over the past year utilised Cameco's Port Hope plant in Ontario, Canada as the preferred delivery location, while minimal market activity was recorded at the MTW or Orano's facility in France.

Over the past year, sellers have struggled to move material not located at Cameco's site. As a result, a situation evolved where sellers holding inventory at Cameco could command substantially higher prices than sellers holding material at the MTW (ConverDyn) or Orano, which led to stalled trading activity at the ConverDyn and Orano locations.

TradeTech's term price indicators are US$33.75/lb (mid) and US$36.00/lb (long). 

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