Barry FitzGerald: BHP warms to uranium in latest economic outlook report

“Garimpeiro” columnist Barry FitzGerald has covered the resources industry for 35 years. Now he’s sharing the benefits of his experience with Stockhead readers.

It’s a little known fact, but BHP (ASX:BHP) is Australia’s biggest uranium producer at its Olympic Dam mine in South Australia’s outback.

Production in FY2025 weighed in 3153t of uranium, enough to also rank OD as a top five global uranium producer from what is actually the world’s biggest uranium deposit.

But uranium, as well as gold, are very much by-product metals to OD’s copper production. Depending on where prices for all of the metals are at, uranium generally accounts for 15-20% of OD’s overall revenue.

So the uranium that comes along with the other metals is a handy contributor to improving the overall economics of OD’s main event – the copper.

BHP has owned OD since 2005. And while it has always been happy to talk up its copper production, the uranium component barely rates a mention.

‘No point prodding the anti-nuclear brigade’ was the strategy behind the silence. But times change and it is OK now to mention uranium and its key role in decarbonisation at a neighbourly BBQ, so it seems.

Uranium outlook

As it has long done, BHP’s profit report released during the week was accompanied by BHP’s thoughts on the economic and commodity outlook (ECO).

For the first time – as far as Garimpeiro can remember anyway – the ECO contained a separate section on BHP’s view of the uranium market along with usual iron ore, copper and coal sections.

The inclusion of uranium this time around got Garimpeiro’s interest up. Not because BHP has found the nerve to see off what is left of the anti-nuclear campaigners, but because of what insights it gives us about where uranium is going.

The ASX uranium sector has struggled so far this year, due mainly to disappointments from mine restarts and the uranium price failing to fire-up in response to the wall of positive news on nuclear power commitments.

After surging through US$100/lb (spot) in January 2024, prices have been plodding along at lower levels, averaging US$71.10/lb in July and fetching US$73/lb this week.

Having said that, the uranium price remains at decade highs. BHP remembers well that it was only five years ago when uranium was trading at $US32.40/lb.

Clearly investors want to see uranium prices heading higher before getting excited about the sector again.

Longer term view

There was some comfort on that score in BHP’s ECO. While it was bullish overall on uranium’s outlook, it was skewed towards the longer term rather than the here and now.

“We expect the upstream market to be broadly balanced in the near-term, with steady demand being met by incremental supply volumes,” BHP’s ECO said.

“However, upward price volatility could still be pronounced owing to inefficiencies in the nuclear fuel value chain.

“The removal of waivers on US imports of Russian enriched nuclear fuel (expected in CY27) and a mismatch between growing fuel demand but limited investment in conversion and enrichment could push prices up periodically.”

Those factors should keep uranium prices elevated, a good thing for OD.

“Longer-term, we expect new upstream uranium supply to be needed by 2030, as nuclear power plant life extensions in the OECD are supplemented by steady nuclear capacity growth in the developing world,” BHP’s economists say.

“We remain cautious about some ambitious government targets aiming to boost nuclear capacity, as the technology is still challenged by relatively high build costs, complex regulatory bottlenecks, long lead times and community opposition to siting close to population centres.

But the same concerns that have plagued nuclear – high build costs, complex regulatory bottlenecks, long lead times and community opposition – are worthy of a note of caution, BHP’s analysts say.

“Nevertheless, growing interest in the role of nuclear in supplying power to data centres, steady progress in small modular reactor technology, and more supportive policy in recognition of its last-mile decarbonisation benefits in the power sector could all provide upside in the long run,” they added.

“As primary uranium production expands to meet rising demand, suppliers will continue to face structural pressures including regulatory compliance, increasing capital intensity, and geological constraints, which are expected to support a stronger long-term price environment.”

Garimpeiro’s take on all that is BHP is expecting price volatility to the upside both in the near and long-term. That has got to be comforting for the ASX-listed explorers, developers and producers in what remains one of the biggest investment thematics out there.

The views, information, or opinions expressed in this article are solely those of the columnist and do not represent the views of Stockhead. Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.