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Uranium Week: Investment Vehicle Concludes Raising

Weekly Reports | Jun 02 2021

This story features PENINSULA ENERGY LIMITED, and other companies. For more info SHARE ANALYSIS: PEN

As the uranium spot price continues a four-week winning streak, Uranium Participation Corp concludes an equity raising to fund future purchases of uranium

-Uranium Participation Corp raises C$80m
-Exelon seeks nuclear plant reprieve
-Uranium spot price rises by 0.8% for the week and 10% for May

By Mark Woodruff

In a good sign for interest in the uranium sector, Canadian-listed Uranium Participation Corp has closed its capital raising with proceeds of approximately C$80.5m/US$66.8 million. The original raising announced 3 May was for C$50m and it was upsized the next day to C$70m.

The company invests nearly all of its assets in uranium, in the form of uranium oxide or uranium hexafluoride, with the primary objective of achieving capital appreciation. Consequently, net proceeds of the offering will be used by the company to fund such future purchases as well as an allocation toward general corporate purposes. After deducting fees, that should give the company enough cash to acquire circa 2mlbs U3O8 at current prices.

For further details on the backstory for recent significant developments for Uranium Participation Corp please refer to last month’s article:

Legislative news

US press reports over the long weekend suggested an impasse in negotiations between bargaining parties over the threatened closure of nuclear power plants in Illinois.

The CEO of America’s leading energy provider, Exelon Corp, stated earlier last month that the company will go ahead with the closure of the Byron and Dresden nuclear plants later this year if the state of Illinois does not pass policy reforms to support their continued operation before the end of the current session. 

The Climate Union Jobs Act (CUJA) is one of several clean energy bills currently under consideration by the Illinois General Assembly. Along with other initiatives, it would create 74m megawatt-hours of carbon mitigation credits for facilities including Exelon's Braidwood, LaSalle, Bryon and Dresden nuclear plants.

Byron's two pressurised water reactors are licensed to operate for another 20 years but would shut in December, while Dresden's two boiling water reactors would shut in November despite having a decade of their operating licence remaining.

Meanwhile, there was a proposal at the Federal level by US senators last week to introduce a production tax credit for existing nuclear power facilities. This energy tax reform bill is supported by the Biden administration, in an effort to reduce carbon emissions.

Company news

Last week, ASX-listed Peninsula Energy ((PEN)) agreed to purchase 300,000lbs of uranium at a price of US$31.35/lb. This will be fully funded by a share placement at 15 cents.

The company is currently focused on transitioning the Lance Uranium project in the US state of Wyoming to low-pH in-situ recovery from an alkaline operation. The company recently updated on the low pH demonstration work and expects completion by the first half of FY22. Shaw and Partners stockbrokers expect the commencement of a revised Feasibility Study in the first half of 2022, incorporating the field demonstration trial.

Settlement is due in June 2021, and the uranium will be stored at the Cameco Facility located in Ontario, Canada.

The company noted “Adding physical uranium to our balance sheet provides significant flexibilities and potential upside as we move towards the restart of operations. Importantly, holding uncommitted uranium inventories at a time when there is a strong and continued push by the US Government to support nuclear power generation and the domestic production of critical minerals like uranium, enhances our ability to successfully participate in expanding market opportunities,” said Managing Director and CEO Wayne Heil.

This week, ASX-listed DevEx Resources ((DEV)) has received firm commitments to raise just under $8 million via a placement. The funds are to be applied to expanded exploration work at its WA, NSW and Northern Territory projects.

The company has flagged using some of the funds on renewed field exploration at the Nabarlek Uranium and Gold-Copper Project.

Investors were offered shares at 32 cents. The company now has a total cash balance of around $17.6 million.

Also this week, ASX-listed Vimy Resources ((VMY)) announced the completion of the Alligator River project acquisition from Cameco Australia. The company is also close to finalising the acquisition of Rio Tinto Exploration’s 21% interest in the King-River-Wellington Range joint venture, part of the Alligator River project. At completion, Vimy Resources will hold 100% of the project.

Uranium pricing during the week

TradeTech’s Weekly Spot Price Indicator is US$31.40/lb, up US$0.25 from last week’s Indicator. It has risen over 10% so far in the month of May. The Indicator is up 3.3% since the beginning of 2021. 

Uranium Pricing-During the month

Market activity was quiet on the last day of the month, as the US celebrates its Memorial Day holiday. As a result, TradeTech's Monthly Spot Price closed at US$31.40/lb at the end of May, a rise of US$2.25 from the end of April, and unchanged from the May 28 Weekly Spot Price Indicator.

TradeTech's Daily Spot Price Indicator averaged a 0.4% interday change in May, while the Weekly Spot Price Indicator increased at an average of 1.5% per week through the month. The monthly uranium spot price has increased nearly 6% so far in 2021.

The current price currently sits 4% above the 2020 average of US$30.15/lb. The average value for 2021 is US$29.86/lb.

A total of 4.6mlbs U3O8 equivalent was traded in the spot delivery window during May. Prices during the first half of the month remained below US$31/lb. However, TradeTech reports that by the third week of the month, prices began to inch up steadily, reaching US$31.15/lb, where the price remained until the last few days of the month. Friday, May 28, saw 300,000lbs trade at successively higher prices to close out the week at US$31.40/lb.

TradeTech notes that while spot supply is currently sufficient to meet demand, excess material has been largely absorbed from the market and sellers are less willing to part with their material at previously reported prices as new demand emerges.

TradeTech's mid term price indicator for May 31 rose to US$31.50 from US$3.000 at the end of April, while the long term price indicator remains unchanged at US$35.00/lb.

Three transactions involving delivery of over 900,000lbs U3O8 in the mid-term delivery window were reported this month. One transaction involved a utility buyer while financial entities acted as buyers in the other two transactions.

Term uranium sellers continue to exhibit a willingness to compete aggressively for utility business in the mid-term space, according to TradeTech. Utilities are consistently commanding multiple offers that are below the published price indicators due to the relatively small quantities and early delivery period, which allows for a variety of entities to compete for the business.

One of the factors contributing to the flat price curve in the mid term is access to exceptionally low interest rates by several non-primary sellers.

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