Weekly Reports | Mar 12 2024
This story features PALADIN ENERGY LIMITED. For more info SHARE ANALYSIS: PDN
The uranium spot market came to a halt last week as US Congress members had differing ideas on a ban of Russian imports.
-Spot U3O8 market on hold
-Term market demand ongoing
-Kazatomprom production guidance downgrade anticipated
By Greg Peel
Last week, the US House overwhelmingly passed legislation meant to speed up the development of a new generation of nuclear power plants, uranium industry consultant TradeTech reports.
It was a rare example of bipartisanship from an increasingly dysfunctional Congress. More true to form, Senate Republicans and Democrats have written their own legislation to promote nuclear power. The two chambers are expected to discuss how to reconcile their differences in the coming months, but final passage is not assured, TradeTech notes, particularly with so many other spending bills still pending.
There are only so many coming months ahead of the election.
The House did manage to pass a stop-gap bill last month to prevent a government shutdown, which is part of a two-step process towards a final budget bill that has been put off multiple times since mid-last year, each time threatening a government shutdown.
The latest spending bill includes US$2.7bn in reprogrammed infrastructure money for enriched uranium supplies. Lawmakers had been trying to include this in the national security supplement to help implement the recently passed Nuclear Fuel Security Act, TradeTech reports, which would ensure the purchase of US nuclear fuel.
Nuclear energy advocates see that act as an important early step in developing a domestic supply of enriched uranium for advanced nuclear reactors. As one of the steps in the process, the US House of Representatives Subcommittee on Foreign Affairs will hold a hearing tonight to review global dependence on Russian nuclear fuel.
The uncertain outcome and timing of these legislative developments have largely caused activity in the spot uranium market to come to a halt as market participants step away from the market taking a “wait and see” attitude, TradeTech reports.
Given the Republican majority House refused to even consider a bipartisan bill from the Senate providing aid to Ukraine, one wonders what attitude will be taken towards any attempt to curb imports of Russian uranium.
In the Real Market
TradeTech’s weekly spot price indicator fell -US50c last week to US$93.00/lb, amidst lack of interest from buyers or sellers, given said uncertainty.
The same uncertainty overhangs actual end-users of uranium, but they can’t afford to play wait and see.
Utilities across the globe were busy last week securing long-term contracts, TradeTech reports. A string of announcements has been forthcoming from producers concerning new contracts or Letters of Intent with utilities. Under the circumstances, utilities have been willing to accept higher prices.
In addition to accepting higher price terms, utilities are demonstrating their support for new or re-emerging supply by agreeing to other terms and conditions that are more favorable to the seller.
TradeTech’s term price indicators remain at US$100/lb (mid-term) and US$75.00/lb (long).
Kazatomprom
Kazakhstan’s mostly state-owned uranium producer Kazatomprom represents some 40% of global U3O8 supply, Citi notes, hence any changes to the company’s production guidance will move uranium prices.
Kazatomprom will release its 2023 earnings result on Friday. Citi is expecting a 2025 U3O8 production target downgrade and/or lower U3O8 inventory levels. The analysts cite constrained sulphuric acid availability and ramp-up challenges that make Kazatomprom’s current 2025 production target unlikely.
Key existing assets are requiring more sulphuric acid to maintain production levels, Citi notes, as grades decline. Kazatomprom has likely depleted most of its easy-to-mine and high-grade resources and is now likely to go after more challenging ore bodies.
New development projects require more sulphuric acid due to demands on initial acidification and geology. Hence, the analysts believe for Kazatomprom to meet 2025 production targets, sulphuric acid consumption will have to increase substantially.
Citi sees the March 15 report as providing a catalyst for higher uranium prices. The broker covers only the one uranium company in Australia, being Paladin Energy ((PDN)), which will shortly restart production at its Langer Heinrich mine in Namibia.
The Paladin share price is highly correlated to the uranium price, Citi notes. The broker has a Buy rating and an $1.45 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 | 11/03/2024 | 0.1200 | 0.00% | $0.19 | $0.05 | |||
| AGE | 11/03/2024 | 0.0550 |  1.85% |
$0.08 | $0.03 | $0.100 | 81.8% |
|
| BKY | 11/03/2024 | 0.3000 |  – 3.23% |
$0.80 | $0.26 | |||
| BMN | 11/03/2024 | 3.1400 | 2.61% |
$3.99 | $1.19 | $7.040 | 124.2% |
|
| BOE | 11/03/2024 | 4.7100 | – 2.48% |
$6.12 | $2.02 | 99.3 | $5.697 | 20.9% |
| DYL | 11/03/2024 | 1.2150 | – 6.18% |
$1.76 | $0.48 | $1.725 | 42.0% |
|
| EL8 | 11/03/2024 | 0.4700 | – 4.08% |
$0.68 | $0.27 | |||
| ERA | 11/03/2024 | 0.0520 | 0.00% | $0.23 | $0.03 | |||
| LOT | 11/03/2024 | 0.3900 | 8.33% |
$0.40 | $0.15 | $0.610 | 56.4% |
|
| NXG | 11/03/2024 | 11.1700 | – 5.90% |
$12.99 | $5.11 | $17.500 | 56.7% |
|
| PDN | 11/03/2024 | 1.2400 | 2.48% |
$1.46 | $0.52 | 357.0 | $1.513 | 22.0% |
| PEN | 11/03/2024 | 0.1100 | 0.00% | $0.20 | $0.08 | $0.340 | 209.1% |
|
| SLX | 11/03/2024 | 4.8900 | 1.03% |
$5.78 | $2.92 | $7.600 | 55.4% |
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