There have been some significant geopolitical moves impacting the uranium market in recent months, not the least of which is the US probe into security of supply concerns.

Stockhead covered the topic in some detail back in April, but with the outcome of the US investigation drawing closer which will set a locally sourced uranium minimum, we thought we would see how the landscape is changing for ASX-listed players.

Right now, there is a buying lull from US utilities because they are waiting on the outcome of the US “Section 232” investigation to see just how much uranium they will have to source domestically.

“Rather than entering into these offtake agreements, the US utilities — which account for more than a quarter of the world’s uranium market — have been drawing on inventories waiting for President Trump’s determination,” Duncan Craib, head of ASX-listed uranium miner Boss Resources (ASX:BOE), told Stockhead.

“So the demand [from utilities] that would ordinarily have entered into the market gradually over time is now likely to enter the market at the same time once an outcome or determination on the 232 petition is made, and that will put pressure on available supply.

“So there’s this huge pent up demand.”

Making US uranium great again

The two big US-based uranium miners that pushed for the investigation — Ur-Energy and Energy Fuels — wanted the requirement to be at least 25 per cent, but there are reports that it may start off at a much more conservative 5 per cent quota, increasing by 5 percentage points each year after that.

At the full 25 per cent requirement, 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.

A 5 per cent quota would amount to between 2 million and 2.5 million pounds, according to Bloomberg New Energy Finance nuclear industry analyst Chris Gadomski.

The US currently imports 98 per cent of its domestic uranium requirement, with a large percentage supplied from Russia and Kazakhstan.

The investigation also looked into restricting uranium supply from those two countries to the US.

Nice win for ASX plays

Although right now it is just pure speculation as to what moves President Donald Trump will make, one expert told Stockhead that restricting supply from Russia and Kazakhstan would be good news for ASX-listed players.

“If that does occur then clearly the US is going to be sourcing uranium from anywhere but those places, and at the moment they get most of it from there,” Voyager Energy director Bruce Lane said.

“So anybody on the ASX that’s exposed to uranium in a jurisdiction other than Kazakhstan or Russia would presumably stand to benefit.”

Voyager Energy has the exclusive right to acquire eight uranium and vanadium exploration projects in Utah and is in the process of being acquired by ASX-listed GTI Resources (ASX:GTR).

Right now there are just two ASX-listed uranium companies with projects in the US – Peninsula Energy (ASX:PEN), which is already in production, and Laramide Resources (ASX:LAM).

GTI plans to become the third.

Whispers the US utilities are willing to pay more

The spot price of uranium isn’t so crash hot right now – sitting just under $US25 ($35.54) a pound in late June – but there seems to be a bit of momentum in the contract price.

“Given that in excess of 90 per cent of US yellowcake is sourced externally from the US then [utilities] are obviously mindful that if things change, they could be asked to source the uranium that they allocate domestically,” Voyager’s Lane said.

“That’s put them in a position of not being covered forward for as long as they normally would contract supply.

“Therefore, they’re going to be in a position once this is clarified and they will be in a reasonable hurry to get recontracted for their forward cover.

“Anecdotally, we’re hearing that they’re prepared to pay up to $US60 a pound.”

Not much uranium is traded on the spot market, according to Lane.

“The contract price is where the volume is, there is very little that is traded on spot,” he explained.

“The vast majority is traded under long-term contracts, typically for 10-20 years.”

Australia needs to have a ‘serious’ nuclear chat

Australia is a long way behind other countries when it comes to the nuclear power story.

But some states are making moves. South Australia previously called for submissions into how it could participate in the nuclear fuel cycle, and now NSW is doing the same.

Boss Resources’ Craib told Stockhead he had been invited by the NSW government to make a submission to an enquiry being made by the Legislative Council Standing Committee on State Development.

The state is considering repealing the Uranium Mining and Nuclear Facilities (Prohibitions) Act 1986.

“The CEO of the Mineral Council of Australia, Tania Constable, recently put out a statement which I think summed it up quite well, in which she acknowledges the federal government is not considering removing the current ban on nuclear power, however, now is the time to end the discriminatory treatment of nuclear energy by repealing the ban,” Craib said.

“Nuclear energy provides 11 per cent of the world’s electricity, which is low cost, zero emissions and it’s base load power available 24/7, and it’s why nuclear power plants are being built in China, the United Arab Emirates, Finland, United Kingdom.

“Twenty per cent of North America’s power is supplied by nuclear.

“We’re not saying it should be the only energy source but it should definitely be part of an energy mix, particularly when you consider the amount of coal that Australia produces and exports.”

Craib said removing the ban on nuclear power would allow Australia to have a “serious conversation about how we can move along, technically advance and introduce nuclear as part of the nation’s energy mix”.

“I think removing the prohibition on nuclear energy will also allow for investment proposals to be brought forward,” he added.

Investors warming to uranium

With geopolitical movements favouring the uranium sector at the moment, investors are jumping at the chance to get into stocks with exposure to the commodity.

Battery metals player Hylea Metals (ASX:HCO) revealed last week that is was buying Paladin Energy’s (ASX:PDN) stake in the Kayelekera uranium mine in Malawi for $10m, and shares shot up nearly 600 per cent to an intra-day high of 9c the day the news was announced.

Shares have since dropped back to 5c, but that is still a 285 per cent gain on what they were before the news broke.

Marenica Energy (ASX:MEY) told investors yesterday that it was adding another 48 million pounds of resource (an increase of 80 per cent) to its portfolio by buying Optimal Mining’s Australian uranium tenements.

The cost — just $250,000 cash and 27.5 million shares.

That news sent shares up nearly 30 per cent on Thursday to and intra-day peak of 11.5c.

“The acquisition is timely given the pending decision on the uranium Section 232 petition in the US and the improving fundamentals for the uranium market,” managing director Murray Hill said.

At Stockhead, we tell it like it is. While GTI Resources is a Stockhead advertiser, it did not sponsor this article.