Uranium Week: Finally, A Ban

This story features LOTUS RESOURCES LIMITED, and other companies. For more info SHARE ANALYSIS: LOT

After five months the US Senate has passed a bill banning imports of Russian uranium. The spot price has reacted accordingly.

-US Senate passes ban on imports of Russian uranium
-Spot price jumps in response
-Waivers lessen the supply blow
-ASX-listed uranium sector preferences

By Greg Peel

After keeping the global uranium sector on edge for the past five months, the US Senate has now passed the Prohibiting Russian Uranium Imports Act. The bill now goes to the president, and will be enacted 90 days post his signature.

The ban will remain in place until end-2040.

The bill does nevertheless include waivers, being (1) no alternative viable source of low-enriched uranium is available to sustain the continued operation of a nuclear reactor or a US nuclear energy company, or (2) importation of the uranium is in the national interest, which will remain in place until the end of 2027.

Industry consultant TradeTech’s weekly spot price indicator has risen by US$4.80 to US$92.15/lb. A total of 1.6mlbs U3O8 changed hand last week, of which 1.1mlbs were traded following the ban announcement.

TradeTech’s term price indicators remain at US$95/lb (mid-term) and US$80/lb (long).

Impact Lessened

The US is largely reliant on imports for its uranium supplies and accounts for around 25% of global uranium demand, notes Morgan Stanley. Canada is its largest supplier of mined uranium (27% of 2022 imports), followed by Kazakhstan (25%), then Russia (12%).

However, when considering enriched uranium, being uranium that has been concentrated ready for a nuclear reactor, Russia's share rises to 27% given its dominance in global enrichment (43% share).

If Russian enriched material were no longer available to the US, this could put more pressure on Western uranium enrichment capacity, Morgan Stanley notes, which accounts for 41% of the total.

The waivers somewhat dull the impact of the ban. Moreover, Morgan Stanley points out, a US-only ban is more manageable for the global nuclear industry than if the EU/UK joined in as well. Imports to the EU could be re-routed to the US.

US reactors use 25% of global uranium, which would need to be supplied by some 40% of enrichment capacity, notes Morgan Stanley. In contrast, if the EU/UK were to join too, this would cover 55% of demand needing to be supplied by 41% of enrichment capacity, putting pressure on this supply.

The other risk is Russia counter-banning its exports to the US.

Victim of Neglect

The nuclear industry has adapted to little or no growth over the last two decades, notes Petra Capital. With no demand growth, all elements of the supply chain have been neglected. The about-turn in the nuclear industry’s fortunes has been stunning, Petra suggests, with planned closures abandoned, reactor lives extended, and now, a shuttered reactor being brought back online.

The COP28 statement (endorsing nuclear energy as “green”) appeared to be the zenith for future demand expectations, only to be followed by Indian goals to increase nuclear generating capacity by more than 10x. While public perception is that nuclear reactors are slow to build, Petra notes they have generally been faster to bring on line than new mines.

We are facing a 1970s style reactor build program, Petra suggests, but likely at a larger scale, better distributed throughout the world, and lasting throughout the 2030s and 2040s.

ASX-Listed Exposure

Among uranium sector companies listed on the ASX, Petra Capital believes Lotus Resources ((LOT)) offers compelling value amongst brownfield developments, while NGX Ltd ((NGX)) offers strategic appeal.

Bannerman Energy’s ((BMN)) Etango project has been extensively de-risked, is shovel ready, and offers scale.

Australia’s two leading pure-play producers, Paladin Energy ((PDN)) and Boss Energy ((BOE)), have now restarted their projects and are producing uranium.

Petra suggests Alligator Energy’s ((AGE)) Samphire project appears to be following in Boss Energy’s footsteps, while Aura Energy’s ((AEE)) Tiris project is excessively discounted and has new management.

Amongst explorers, Petra likes Elevate Uranium ((EL8)), DevEx Resources ((DEV)) and Global Uranium & Enrichment ((GUE)).

Uranium companies listed on the ASX:

ASX CODE	DATE	LAST PRICE	WEEKLY % MOVE	52WK HIGH	52WK LOW	P/E	CONSENSUS TARGET	UPSIDE/DOWNSIDE
1AE	06/05/2024	0.0900	0.00%	$0.19	$0.05
AGE	06/05/2024	0.0610	1.67%	$0.08	$0.03		$0.100	63.9%
BKY	06/05/2024	0.3900	14.71%	$0.80	$0.26
BMN	06/05/2024	4.5800	20.53%	$4.59	$1.19		$7.400	61.6%
BOE	06/05/2024	5.4200	9.72%	$6.12	$2.58	54.1	$5.425	0.1%
DYL	06/05/2024	1.6150	11.00%	$1.76	$0.53		$1.770	9.6%
EL8	06/05/2024	0.5100	4.08%	$0.68	$0.27
ERA	06/05/2024	0.0540	0.00%	$0.08	$0.03
LOT	06/05/2024	0.4400	0.00%	$0.47	$0.17		$0.610	38.6%
NXG	06/05/2024	12.6800	– 2.69%	$13.66	$5.78		$17.500	38.0%
PDN	06/05/2024	15.6400	11.95%	$15.72	$5.15	-316.8	$16.470	5.3%
PEN	06/05/2024	0.1150	4.55%	$0.20	$0.08		$0.310	169.6%
SLX	06/05/2024	5.9700	17.06%	$5.99	$2.92		$7.600	27.3%

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