Proactive Investors - It’s a complicated world, the uranium space.
First off, you’ve got the danger, death and disinformation.
And these are working at the highest levels of global politics - it’s widely believed that the Chernobyl disaster played a key role in ending the Cold War, and that the Soviet government’s inability to tell the truth to its own people about its nuclear programme undermined its legitimacy.
Then there’s the Fukushima issue, and the irradiation of fish in the Pacific and local water in general, which set the cause of nuclear back at least a decade.
Problems, problems.
But the pro-nuclear lobby have salient counter-arguments.
By some reckonings deaths from nuclear power are 99% lower than they are from coal, if you factor in the effects of pollution, emissions, and mining accidents. Yes, there may be long term toxicity issues from nuclear, but balancing those against the immediate costs in human lives is nuanced, to say the least.
And so, nuclear power continues to have plenty of adherents, and they are able to marshal cogent arguments to support their views. And again, these are at the highest levels.
Amongst the candidates in the upcoming 2024 Presidential elections, Robert Kennedy Junior is against nuclear, while the other main candidates are all locked in. De Santis told reports in February that nuclear was the cleanest source of power “of all.”
Donald Trump was pro, and the incumbent President can’t afford to undermine his green credentials by switching out of nuclear to higher emitting energy sources.
And in addition to this broad context of a greener future, there’s also the pressing problem of immediate energy security, at a time when war in Russia and Ukraine is escalating. Russian influence on the energy markets is huge, and might be diminished if more nuclear power plants were constructed and less Russian gas consumed.
Accordingly, it’s no surprise to learn that several countries have major nuclear power construction programmes underway and, simultaneously, that the nuclear-armed nations are all upgrading their arsenals.
It’s reckoned that 79,400 tonnes of uranium will be required to feed the world’s nuclear reactors by 2030, up from 62,500 tonnes in 2021. Further out, the figure is likely to grow to 112,300 tonnes of uranium in 2040.
And against this backdrop, spot uranium prices have almost doubled in the last two years, from US$31 a pound to the current price of around US$53 a pound. That’s not as high as the US$64 that spot prices hit in August 2022, but it certainly points to an upward trend, and a recognition that nuclear power is very much back as a key part of any conversation about the future.
What’s in this for the mining companies?
Again, the uranium space is complicated.
When prices weaken, the major producers in Kazakhstan and Canada tend to curtail production in order to create some kind of floor. They have a history of sacrificing the top-line in order to protect margins, as any rational business might.
But this also means it’s hard to predict exactly how pricing will work in the future. A strengthening of the price would likely lead to the reopening of shuttered mines, increasing supply and putting a ceiling on the upside that corresponds to the floor on the downside.
But in between the floor and the ceiling there is room for manoeuvre.
Spot uranium is up 94% since 2020, and uranium is now coming back onto the radars of investors.
In the past week or so there have been some ups and downs, but both are indicative of renewed interest. Shares in both Paladin and Deep Yellow, uranium companies that operate in Namibia suffered a mauling on the Australian Securities Exchange after the Namibian government seemed to indicate that it wanted to take a bigger piece of the pie.
Bad for Paladin, perhaps, although the company later released a statement designed to calm markets which reassured that in the company’s “continuous dialogue” with the government a renegotiation of terms had yet to be mentioned.
But possibly more significant is that the government thinks it’s worth taking a closer interest in the first place. Paladin’s giant Langer Heinrich project is slated to come on stream in 2024. With the uranium price high and the long-term outlook good, it’s not surprising that noises off are beginning to be heard.
In Canada, they can expect a little more stability from the government, since uranium mining is already well established there and since, in fact, after Kazakhstan, Canada is the world’s most significant uranium producer. That gives its production a certain strategic significance as far as its southern neighbour, the USA is concerned.
And there is some comfort for policy-makers in knowing that Canada’s uranium champion, Cameco, operates the world’s largest uranium mine, at MacArthur River in Saskatchewan. That being so, they can work out the ins and outs of the environmental issues later.
In times of a strong uranium price, indeed, Cameco is often the go-to company.
But the real upside is often had much further down the value chain, in exploration.
Opportunities for finding uranium in safe jurisdictions - away from the covetous eyes of sequestration-minded governments – still abound, especially in Canada, the USA, and Australia.
In certain cases, such as with in-situ leaching, advances in technology also mean that uranium can be extracted from ore without any mining even taking place. Which ticks at least some of the environmental boxes too.
One such is the Ponton project in Western Australia, owned by Manhattan Corporation. And there are others.
More conventionally in the exploration space, in Canada Power Metal Resources has just staked new ground in the famous Athabasca, where a plethora of other junior miners continue to explore and make discoveries. That move has brought renowned Canadian resources investor Rick Rule onto the Power Metals register, underscoring both the renewed sector interest in uranium, and the value that’s perceived to be on offer at the exploration level.
Other companies with interesting earlier stage projects include Thor Energy (LON:THRL), GoviEx (TSXV:GXU), CanAlaska (TSXV:CVV), Standard Uranium (TSXV:STND), Aurora, IsoEnergy (TSXV:ISO), NexGen (TSX:NXE), enCore Energy Corp (NYSE:EU) and Ur-Energy (NYSE:URG).