Uranium Week: Uranium Joins The China Rally

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Global momentum for nuclear energy generation supported buying interest in the uranium spot price market while analysts remain positive on the longer-term price outlook and challenged supply dynamics.

-U308 spot price rallies 4%
-Solving the nuclear energy generation conundrum
-Will utilities have to come to the buying party?

By Danielle Ecuyer

Has buying interest ticked up?

Activity in the spot U308 market improved last week with eight transactions conducted including the Sprott Physical Uranium Trust (SPUT) which raised funds from a “surge” in buying interest last Wednesday, industry consultant TradeTech reports. 

The trust acquired 100klbs of U308 on Thursday at US$81.75lb. This was followed up with two buyers on Friday, elevating the spot price to US$82lb, up US$2.75lb on the week. The price rallied 4% over the last week and has risen 12% on a year ago but is down -11% in 2024.

The TradeTech Mid-Term U308 price indicator stands at US$86lb and the Long-Term U308 price indicator at US$82lb.

As discussed over the last couple of weeks, momentum continues to grow globally to support a nuclear energy renaissance. 

Finding solutions to new nuclear energy supplies

The secular drive for reliable clean energy for large scale data centres forms part of the narrative underpinning the shift to recommission closed nuclear plants as well as develop new facilities.

Last week, NextEra Energy announced it was considering the potential restart of its Duane Arnold Energy Centre. The 601MW plant was shut down four years ago for commercial reasons but changing demand dynamics have prompted a re-assessment.

In a wide-reaching interview with CNBC last week, Mike Goff, the acting assistant secretary for the Office of Nuclear Energy at the Department of Energy, detailed how the US needs to add 200GW of nuclear power.

Based on the current average nuclear plant size, the target equates to 200 new plants, which in the current context compares to the existing 94 plant fleet, the largest in the world, supplying 100GWs or 18% of the country’s energy generation in 2023.

The industry is at a crossroads where rising demand from energy hungry hyperscalers, Microsoft, Google, Amazon and Oracle, is meeting clean energy decarbonisation targets.

The US government outlined a global pledge at COP28 at the end of 2023 to triple nuclear energy production by 2050 to achieve net zero emissions.

This week 14 global banks and financial institutions committed support to achieve the tripling of nuclear energy generation under the climate goals.

“New nuclear power is both clean and safe, and more importantly proven, with a number of nations now operating highly advanced and ‘commercially viable’ third- and fourth-generation fission technologies,” said James Schaefer, Senior Managing Director of Guggenheim Securities. 

“It is essential that we accelerate the progression of planned projects into plants on the ground given the huge demand coming down the line for data centers and AI technologies. This will require nuclear companies, plant owners, data center and technology companies, together with banks and financial institutions to collaborate closely”.

Goff also outlined how shuttered coal fired power plants or those expected to retire could boost the nuclear energy transition. Existing infrastructure and grid connection could assist in lowering the costs of developing up to 174GWs of new nuclear power.

Brokers reiterate an upbeat stance

Canaccord Genuity reaffirmed its long-term U308 price average of US$90lb. Discussions with industry participants suggest to the broker there is in effect a “standoff” between sellers and utilities. Canaccord views the standoff as unsustainable with utilities eventually having to accept a new normal of higher U308 prices, resulting in upward pressure on both the term and spot uranium prices.

Due to what the broker sees as the “fragility” of new mine supply with production downgrades from existing producers over the last year, the industry will remain in structural deficit until 2027. The analyst highlights the supply downgrades can be covered by inventory draw-downs in the short term.

Canaccord’s preferred equity exposures in Australia are Paladin Energy ((PDN)), $16.50 target price (Buy rated) with Speculative Buy ratings for Lotus Resources ((LOT)), Deep Yellow ((DYL)) and Boss Energy ((BOE)) alongside respective target prices of 52c, $1.92, $5.85.

In other corporate news, Canaccord highlighted Bannerman Energy ((BMN)) has expanded the projected window for a financial investment decision (FID) at the Etango project and is targeting a positive decision in 2025.

This timeline aligns with Canaccord Genuity’s prior forecast, and the broker forecasts first production in 2029. The bulk earthworks contract has been awarded to a consortium led by Civmec ((CVL)) and NRW Holdings ((NWH)).

Citi upgraded and revised its metal and commodities price outlook last week for the China stimulus measures and sees upside potential from current spot prices for uranium, manganese and coking coal. This broker rates Paladin Energy as a Buy with a $15 target price.

For more of the latest research: 

https://fnarena.com/index.php/2024/09/25/lotus-resources-building-paladin-2-0-plus/

https://fnarena.com/index.php/2024/09/24/uranium-week-banks-microsoft-go-nuclear/

Uranium companies listed on the ASX:

ASX CODE	DATE	LAST PRICE	WEEKLY % MOVE	52WK HIGH	52WK LOW	P/E	CONSENSUS TARGET	UPSIDE/DOWNSIDE
1AE	27/09/2024	0.0500	25.00%	$0.19	$0.03
AEE	27/09/2024	0.1600	10.34%	$0.35	$0.11
AGE	27/09/2024	0.0500	9.09%	$0.08	$0.03		$0.100	100.0%
AKN	27/09/2024	0.0100	0.00%	$0.07	$0.01
ASN	27/09/2024	0.0800	1.30%	$0.20	$0.07
BKY	27/09/2024	0.4000	26.98%	$0.45	$0.26
BMN	27/09/2024	3.0000	17.60%	$4.87	$1.90		$7.400	146.7%
BOE	27/09/2024	3.2800	15.17%	$6.12	$2.38	23.5	$4.280	30.5%
BSN	27/09/2024	0.0400	16.67%	$0.21	$0.02
C29	27/09/2024	0.0700	0.00%	$0.12	$0.06
CXO	27/09/2024	0.1200	5.26%	$0.43	$0.08		$0.090	-25.0%
CXU	27/09/2024	0.0200	0.00%	$0.06	$0.01
DEV	27/09/2024	0.1700	23.08%	$0.45	$0.11
DYL	27/09/2024	1.3600	17.07%	$1.83	$0.91	-99.3	$1.770	30.1%
EL8	27/09/2024	0.3700	14.71%	$0.68	$0.26
ERA	27/09/2024	0.0100	0.00%	$0.08	$0.00
GLA	27/09/2024	0.0200	100.00%	$0.04	$0.01
GTR	27/09/2024	0.0100	0.00%	$0.02	$0.00
GUE	27/09/2024	0.0700	16.67%	$0.18	$0.05
HAR	27/09/2024	0.0400	25.00%	$0.28	$0.03
I88	27/09/2024	0.5100	8.51%	$1.03	$0.14
KOB	27/09/2024	0.1400	20.00%	$0.18	$0.07
LAM	27/09/2024	0.6750	20.11%	$1.04	$0.48
LOT	27/09/2024	0.2600	14.58%	$0.49	$0.20		$0.540	107.7%
MEU	27/09/2024	0.0400	0.00%	$0.06	$0.03
NXG	27/09/2024	9.6900	4.49%	$13.66	$7.89		$16.200	67.2%
ORP	27/09/2024	0.0500	-16.67%	$0.12	$0.04
PDN	27/09/2024	11.4400	19.07%	$17.98	$8.15	23.1	$14.160	23.8%
PEN	27/09/2024	0.0900	4.44%	$0.15	$0.07	30.0	$0.260	188.9%
PNX	27/09/2024	0.0040	0.00%	$0.01	$0.00
SLX	27/09/2024	4.2600	8.83%	$6.74	$2.93		$7.200	69.0%
TOE	27/09/2024	0.2300	21.05%	$0.70	$0.01
WCN	27/09/2024	0.0200	5.26%	$0.02	$0.01

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