Key report shows uranium supply will struggle to keep up with demand

• Uranium demand forecasts continue to get stronger as more countries commit to expand nuclear power
• Biennial WNA Nuclear Fuel Report sees reactor requirements doubling by 2050
• Supply will struggle to keep up, with no major mine additions likely in next five years

While gold’s record run is hogging the spotlight, uranium remains a hot topic thanks to two gabfests happening in the first fortnight of this month.

Last week, the three-day World Nuclear Symposium was held in London with an estimated 1100 delegates attending.

“Sentiment at this year’s conference appears to have taken another leg up with record attendance,” analysts from BMO Capital Markets said.

Closer to home, the RIU Uranium Investment Day will be held in Perth today, which will include a keynote speech from Argonaut deputy head of research Jon Scholtz and presentations from uranium players including NexGen Energy (ASX:NXG), Lotus Resources (ASX:LOT), Greenvale Energy (ASX:GRV) and American Uranium (ASX:AMU).

Financing key

According to BMO, financing solutions for the industry were front and centre at the symposium last week, with more financial institutions in attendance.

“This year built significantly on the trend seen last year, as the industry looks to find attractive, repeatable financing solutions that can support its ambitious growth plans,” it said.

“On new builds, with increasingly positive appetite from all stakeholders, including wide political support (31 countries now support the pledge to at least triple nuclear power 2050), we note finding these mutually beneficial financing solutions does appear to be getting closer.”

Uranium developer Aura Energy (ASX:AEE) is advancing the financing process for its Tiris project in Mauritania with the help of advisor Orimco.

Aura managing director Andrew Grove, a former banker himself, said the team had been working through all the debt providers, including commercial banks and development finance corporations.

“There’s an extra layer for uranium, because a lot of those have historical anti-proliferation bans on them – the World Bank, African Development Bank, IDC – those policies are changing, but they take a long time to change in those organisations,” he told the Africa Down Under Conference in Perth last week.

“We are going down a process, and we’ve got some offers from private equity groups.

“We’re also working through an offer from the US Development Finance Corp, so that’s essentially almost a DFI [development finance institution], but they’re more politically aligned, obviously, they like uranium, nuclear power and supply chain security, and they like Mauritania, so that’s a quite a good funding source for us.”

Aura is also weighing up equity and asset-level transactions for the US$230 million mine, which is projected to produce 1.8 million pounds of uranium per annum at all-in sustaining costs of just US$35.70/lb over a 25-year mine life.

“You’ve got to be flexible, and bringing all these parties together is no mean feat, because it does interplay with each other,” Grove said.

“We’re progressing down a couple of things that we think we should get a resolution by the end of the year.”

Nuclear and uranium demand surging

The World Nuclear Association meanwhile published its biennial Nuclear Fuel Report last Friday, forecasting a 5.3% compound annual growth rate in uranium demand through to 2040, up from 4.1% previously, and above BMO’s estimate of around 3.6%.

“As a first pass, near term nuclear capacity is 2% lower than our forecast by 2030, with fewer capacity additions in the interim, however, the long-term outlook is 12% higher than our figure by 2040 and up 9% versus the last fuel book,” BMO said.

BMO noted that most of the upward revisions in forecast installed capacity appeared to be the increased nuclear builds outside China, including in the US and France.

Last week, a report from Citi pointed to recent policy developments in the US, including President Donald Trump’s signing of four executive orders to boost the nuclear sector, as being positive for sentiment.

“The headline goal is to increase US nuclear capacity from 100GW to 400GW by 2050 — a move that would add ~150Mlb/year of uranium demand, ~doubling today’s global market from the US alone,” it said.

According to the WNA report, global reactor requirements for uranium in 2025 are estimated at about 68,920t, a figure which is expected to more than double to over 150,000t by 2050.

The bull case sees requirements surging to 204,000t in that timeframe, while even the lower scenario has requirements rising to more than 107,000t.

“For uranium, recent production challenges highlight supply side risk, which could see some improvement in spot market and contracting volumes into year-end as we enter this typically seasonally stronger period of the year,” BMO said.

Citi sees the spot price rising to US$80/lb within three months and a return to US$100/lb next year.

“Term prices have been trading at US$80/lb in the past five months, which we consider supportive for our bullish narrative,” it said.

“We expect uranium prices to stay elevated for the next 2-3 years, as a solid bull case has developed.”

According to Citi, when paired with dwindling inventories in the mid-term and production developments, increasing enrichment capacity could also play a bigger role than before.

“We project … uranium supply from existing mines to increase by 16.5Mlb in 2025 year-on-year, mainly led by growth of production in Africa, US, and Kazakhstan, with the total annual output at 162Mlb,” the bank said.

“Lack of any new mine development that can bring a meaningful uranium supply in the next five years carries a significant risk for balances and uranium price.”

At Stockhead, we tell it like it is. While Aura Energy and Greenvale Energy are Stockhead advertisers, they did not sponsor this article.