Uranium’s ‘Groundhog Day’ is almost over, Vimy says

In the film Groundhog Day, weatherman Phil Connors relives the same sh*&ty 24 hours, over and over again. A depressed uranium market is experiencing its own ‘Groundhog Day’, Vimy’s (ASX:VMY) Mike Young says – always on the verge of a recovery but never quite getting there.

But like the movie, there’s a new dawn coming for beleaguered uranium investors; and probably soon.

Young says there’s “panic buying ahead” from utilities as existing uranium inventories diminish.

“Inventories are one of the reasons the uranium price has remained low,” he told delegates at the RIU Explorers Conference in Fremantle.

“The US (about 28 per cent of the market) stocked up on inventory a few years back when Kazakhstan, the world’s largest producer, was overproducing.

“But these inventories are now dropping.”

The next contracting cycle is upon us

Uranium is a long-term contract market; right now — after running down those stockpiles for several years — utilities are contracting for delivery in 2023-2024.

“In 2019, five contracts were signed in the US,” Young says.

“This week, there have been four requests for proposals from US utilities.

“In one week. Is that an anomaly or a beginning of a trend? We think it’s the beginning of a trend.”

… and we are heading towards a supply deficit

“We call it a game of musical chairs,” Young says, “the music will stop and there won’t be enough chairs for the utilities to sit on.”

Young says reactor growth will be a steady 2 per cent per annum out to 2040, from 373 gigawatts (GW) to 569GW. Globally, 493 new reactors are to be built or are currently under construction.

“That’s 247 million pounds of additional uranium on top of the 170 million pounds that’s currently being used globally,” Young says.

“So, you can see there will be a massive shortage and the utilities know this.

This big hatched area here is called ‘unspecified supply’:

“These are deposits which have inferred [lower confidence] resources, or they’ve not had economic studies done, or the people involved are saying ‘by 2025 we’ll be producing 3 million pounds of uranium a year’ but the project is located in a national park,” Young says.

“It is supply that is not assured.”

Right now, there are only 10 deposits in the world that are either mothballed mines (4), or projects that are planned that could come online anytime soon (6). That’s not much to choose from as the industry grows and starts searching for new supply.

Vimy has two of those projects, including Mulga Rock.

“As [utilities] go into the contract cycle we will be ready,” Young says.

“We want to be funded this year, build our plant and be producing uranium in three years.”

Groundhog Day is over, Young says, “and I am waking up with Andie MacDowell.”