Uranium stocks guide: Here’s everything you need to know
There has been a lot happening in the uranium space in the past few years, but it is still yet to really take off.
However, there seems to be a wave of optimism among industry watchers that a shortage of projects and rising demand is setting the uranium industry up to go for a run.
The uranium price hit a record high of $US135 ($193) a pound in 2007, but the price of the commodity took a massive dive following the Fukushima nuclear disaster in Japan in 2011.
The price went as low as $US18/lb in 2017 before creeping back up to $US29/lb late last year and most recently back to $US25.75/lb on the short-term market.
At its latest short-term price (and most is sold under long-term contract) uranium is less than half the estimated $US65/lb required to encourage the reopening of mothballed mines and even less than the “incentive” price to develop new mines.
This has led to a drastic fall-off in the number of uranium producers from around 450 a decade ago to just 40 now.
At the same time, there are currently about 452 operable reactors worldwide, 54 reactors under construction and a further 150 planned.
Uranium, which has the chemical symbol U, is a very heavy metal that is primarily used as a fuel to provide nuclear power and is also used in nuclear weapons.
One kilo of uranium can produce about 20 terajoules of energy — as much energy as 1500 tonnes of coal.
Uranium occurs in most rocks in concentrations of 2 to 4 parts per million and is as common in the Earth’s crust as tin, tungsten and molybdenum, according to the World Nuclear Association.
Australia has the world’s largest uranium resources, accounting for about one-third of the world total.
In terms of production, Australia ranks third behind Kazakhstan and Canada. All of Australia’s uranium is exported because the country does not generate nuclear power.
There are a few things going on in the market that is seeing an increase in demand for uranium and as a result, uranium stocks on the ASX.
In 2015, Japan began restarting some of its nuclear reactors following safety inspections.
The country has been progressively restarting reactors ever since and it appears to be ramping up the restarts.
2018 witnessed the most restarts, with five coming back into operation – more than the number of reactors restarted in the three previous years combined.
There also appears to be a weakening in the opposition to nuclear power, according to Arun Sengupta, executive director at Canary Capital.
“I think the psychology against uranium has changed,” he told Stockhead. “Even the Union of Concerned Scientists have dropped their historical opposition to nuclear power.
“They’ve said that really the transition from fossil fuels to green energy cannot be made without the help of uranium to fill the gap in between.”
Meanwhile, an investigation into uranium imports in the US could result in the country needing to grow its domestic production to meet new regulations.
Ur-Energy and Energy Fuels have called on the government to impose a restriction that requires US utilities to source 25 per cent of their supply from freshly mined US uranium.
To put that into context, the US would have to produce 12 million pounds of uranium each year to meet that requirement, but right now the country produces less than 2 million pounds.
There is also a more near-term wave of demand for uranium expected.
While the US has been carrying out its uranium probe, utilities have stayed away from long-term contracts until they know the outcome.
“Basically, the long-term contract buyers are all sitting on their hands waiting to understand what the outcome is and the implications, so they make sure they’ve got the right strategy for purchasing,” Julian Tapp, chief nuclear officer for junior uranium miner Vimy Resources (ASX:VMY), told Stockhead.
“There’s a burst of demand due to come and once the decision is known then they’ll all go out and fill up before the price gets pushed up.”
Peninsula Energy (ASX:PEN) is already producing uranium from its Lance operation in Wyoming, US. The company sold 106,000 pounds of uranium during the March quarter which earnt it US$3.65m.
Berkeley Energia (ASX:BKY) is advancing its Salamanca uranium mine in Spain towards production. It is expected to produce over 4 million pounds of uranium at a cost of US$13.30 per pound over a 10-year mine life.
Canada-based Laramide Resources (ASX:LAM) is developing uranium projects in New Mexico and Utah in the US, and also has projects in Queensland and the Northern Territory.
Boss Resources (ASX:BOE) is progressing the restart of its Honeymoon mine in South Australia. Honeymoon is one of only four Australian mining operations of scale to have a uranium export permit.
Vimy Resources (ASX:VMY) is one of only three companies that have been allowed to go ahead with the development of their uranium mines in Western Australia. The company is advancing its “Mulga Rock” project in Western Australia towards production. The mine is expected to produce 47.1 million pounds of uranium over 15 years.
Toro Energy (ASX:TOE) has also received approvals to go ahead with its Wiluna mine in Western Australia. The company placed the project on the backburner during the period of low prices, but has now dusted it off and is considering bringing it into production as a uranium and vanadium operation – to help boost its bottom line.
Cauldron Energy (ASX:CAU) owns the Yanrey uranium project in Western Australia. However, when the WA state government implemented the ban on most new uranium mines in 2017, Cauldron stopped work on the project and began searching for advanced exploration plays in other commodities, mostly in Namibia and the Democratic Republic of Congo.
Deep Yellow (ASX:DYL) is on the hunt for uranium in Namibia. The company’s partner on its Nova project is Japan Oil, Gas & Metals National Corporation (JOGMEC) – the minerals exploration arm of the Japanese government.
JOGMEC has to spend $4.5m on exploration within four years of striking the deal to earn a 39.5 per cent stake in the project.
Also focused on Namibia, Bannerman Resources (ASX:BMN) has a 95 per cent stake in the Etango uranium project. The company says it is one of the world’s largest undeveloped uranium projects.
When in operation, Etango is expected to produce 7-9 million pounds of uranium each year for the first five years and 6-8 million pounds each year after that, for an initial 16 years.
Marenica Energy (ASX:MEY) is another small cap explorer with projects in Namibia. The company was recently granted four new exploration licences in the region. Marenica said historical drilling indicated that its new patch of ground hosted extensions of Deep Yellow’s neighbouring Tumas East prospect.
The company has two other projects, Marenica and Mile 72, in Namibia.