Pic: Dan Brownsword (Cultura) via Getty Images.
This uranium explorer reckons the US needs to focus on ‘pounds in the ground’ to rebuild its supply chain
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It’s no secret that uranium is vital to the United States’ national security.
Last week a supressed investigation on the effects of imports of uranium on national security was released and basically confirmed that it’s a security risk for America to continue to rely on imports – and that a large increase is required for domestic uranium output.
While this is not new information, it’s solidified the outlook for the sector and has bolstered the confidence of uranium players on the ground like GTI Resources (ASX:GTI) with its Henry Mountains project in Utah.
Executive director Bruce Lane says the issue going forward will be reinstating the supply chain in the States.
“If you look at the supply chain clearly somebody’s got to explore for it, someone’s got to dig it up, somebody’s got to process it and turn it into yellowcake and then an enricher turns it into nuclear fuel,” he said.
“But the US don’t have many enrichers, even that part of the supply chain is broken.
“So not only do you not have any new pounds being defined and discovered, you don’t have anywhere for it to go for enrichment in the US before it goes to utilities – so they’ve got to rebuild their supply chain.”
US$6 billion bipartisan nuclear aid budget
And the country is getting the ball rolling – there’s already a US$6 billion bipartisan nuclear aid bill on the table.
“If they’re going to invest in the rest of the supply chain, they’re not going to ignore exploration,” Lane said.
“Whether or not that leads to specific incentives for uranium exploration I don’t know – there’s nothing specific that I’m aware of on the table – however, from an investment thesis point of view someone needs to explore for and find more pounds.”
What does this mean for the price forecast?
Lane said a producer in Wyoming is currently idled and they’re buying uranium on the spot market at around $30/per pound just to feed contracts that are in the mid-$40s for supply.
“That’s a lot of money just for sitting at a desk and buying and selling uranium and they’re leaving their pounds in the ground for a day when the price improves,” he said.
But he reckons the outlook for the price is strong.
“There’s a swathe of companies around the world who are in the production phase/stage and who are buying physical because they want to fill contracts when they go to restart – and also because they know it’s a good investment,” he said.
“There’s funds out there buying physical as well – there’s just a bigger push and a lot more interest in physical uranium.
“They’re not there for a 2% compound annual growth rate and the value of uranium – there’s a genuine belief that the price will move at a much higher level in the not-too-distant future.”
“Now is that six months, 12 months, two years, three? Everyone’s saying you’ve got to be patient, there’ll be volatility.
“The uranium price should improve markedly; it should go back towards that incentive price but it might get there on a big overshoot and then settle back.
“But the demand for nuclear power, the demand for uranium, is only going one way – that’s clear.”
Investors should focus on finding pounds in the ground
Lane said the outlook suggests that even if Kazakhstan’s uranium giant Kazatomproms was to double in size it’s still not going to be anywhere near enough to supply what the world needs going forward.
“It’s a complex investment case from a timing point of view, and that’s why we believe that you should be investing in finding pounds in the ground and that’s what we’re trying to do in the US,” he said.
“We believe there’ll be a significant change in the US industry in the supply chain in the next few years.
“All the signs are there, there’s bipartisan support for nuclear power in the US and I think the younger generation are more concerned about climate change than they are about nuclear power.
“We’re predicting that uranium exploration will come back to life, and we’re trying to explore locations where the timeframe from pounds in the ground to production is as quick as possible.”
At Stockhead, we tell it like it is. While GTI Resources is a Stockhead advertiser, it did not sponsor this article.
