The Uranium Price Is Surging 🚀Are You Investing? 🤔

Nuclear's carbon-free promise pits proponents eager for clean energy against critics wary of waste and safety risks, sparking heated headlines as the world weighs its climate change potential. At the 28th Conference of the Parties (COP28), more than 20 countries committed to tripling their nuclear energy capacity by 2050.

Uranium fuels the nuclear chain reaction, acting as the key ingredient for generating nuclear energy. Sulfuric acid is used in uranium mining to dissolve minerals, facilitating extraction and processing.

On January 12, one of the world's biggest nuclear energy players, also extracting uranium, announced a cut in 2024 production. The company explained in a statement that this is a result of "the availability of sulfuric acid, a critical operating material, as well as delays in completing construction works at the newly developed deposits.

If limited access to sulfuric acid continues throughout this year, and should the company not succeed in catching up with the construction works schedule at the newly developed deposits in 2024, Kazatomprom's 2025 production plan may also be affected, subject to considerable supply chain risks," the company added.

A detailed update regarding the impact of this, as well as the production guidance for 2024, is expected to be released by February 1, 2024. Here’s the announcement.

Reduced uranium production by a key player raises supply chain risks, impacting uranium-related stocks amid global plans to triple nuclear energy capacity by 2050. Factors like limited sulfuric acid access and construction delays may affect the uranium market and its ability to meet future demand and targets set. 

According to mining.com, earlier this month, the chief executive officer of Sprott Asset Management stated, "The global pivot back to nuclear energy creates opportunities and challenges… We need to rebuild supply chains that have long since disappeared."

For investors, the uranium production cut poses risks, with potential supply shortages affecting stock prices. Earlier this month, uranium prices surpassed $92 per pound, marking the highest level since late 2007. This surge, continuing from late 2023, is driven by growing demand and supply disruptions. The uncertainty about the uranium key player's 2025 production plans adds an extra layer of risk. Monitoring uranium market developments, including supply chain risks, is crucial for informed investment decisions. There are several options with the potential to create value for investors in the short to long term. Investors have the choice to invest any amount on EasyEquities. These options include:

• Adavale Resources Limited: A uranium exploration license was granted in South Australia last month. "This new license significantly expands our ground holding in a highly prospective Uranium province." - Adavale’s Executive Director, David Riekie.
• Boss Energy Limited: In December, it signed a 7-year deal (starting in 2025 and ending by the end of 2031) to sell uranium to a US power utility. "Signing our first sales contract is a major milestone for Boss and another key de-risking event for the Honeymoon Project… With production about to start and the project running on time and on budget, we are extremely well-placed to capitalize on the rising uranium price." - Boss Managing Director Duncan Craib.
• Elevate Uranium Limited: Secured funding that allows the explorer to advance its flagship uranium project in Namibia (a country considered among the richest in uranium) and explore other projects in Australia. "Koppies is one of the shallowest uranium resources globally, with 95% of the resource within approximately 15 meters of the surface and 50% of the resource within approximately 6 meters of the surface. These parameters are important for any potential low strip ratio, low-cost mining operation at Koppies." - Elevate Uranium’s Managing Director, Murray Hill.
• Bannerman Energy Limited: received a mining licence for its Etango Uranium Project in Namibia. The company has also awarded contracts for early works, including the construction water supply and site access road. “The grant of the Etango Mining Licence represents a milestone event for Bannerman and our valued stakeholders. This moment is the culmination of our unwavering focus on Etango… all the while maintaining our conviction in the vital role of nuclear power for a better world.” Bannerman Managing Director and CEO, Brandon Munro.
• Cameco: In partnership with Brookfield Asset Management and its affiliates, Cameco announced the successful completion of the acquisition of Westinghouse Electric Company in November 2023, securing a 49% ownership stake. "Cameco’s 35 years of experience in uranium mining and nuclear fuel production, combined with Brookfield’s expertise in clean energy, is expected to provide a solid foundation for Westinghouse’s continued success, creating a powerful platform for strategic growth across the nuclear sector." Cameco President and CEO, Tim Gitzel.

According to EasyAsset Management's fund manager, Shaun Krom, until recently there has been an over-supply of uranium in the market. After the Cold War, Russia converted many of their nuclear warheads to fuel. The market then got additional supply when the Fukushima incident prompted Japan to decommission its nuclear fleet, which flooded the market with space capacity to the point that many mines simply shut down. That stock has now been worked through the market resulting in potential demand outstripping supply.

Furthermore, there is geopolitical risk in that the world’s biggest producer is Kazakhstan, which produces 42% of the world’s uranium supply and is aligned with Russia; Russia itself is the world’s largest enricher of uranium (after uranium is mined, it needs to be enriched before it can be used). 

Furthermore, uranium represents a minor cost for reactors, making the price of uranium relatively inelastic.

"Uranium is interesting as it’s the only dependable green fuel, and this has now been globally recognized. The Inflation Reduction Act earmarks funds for nuclear. China and South Korea are on a development spree, and it's gaining traction in Europe.

EasyAsset Management has invested in this via a more conservative play, which is Cameco, a Canadian company (and thus benefitting from the Inflation Reduction Act). They are the largest Western company of uranium mines, trading and mills and supply about 20% of global production. They are a large established producer of uranium, have large demonstrated reserves and have demonstrated technical expertise where smaller miners are inherently risky," he added.

Conclusion

Commodity price movements are pivotal (this can also be viewed on sources like Trading Economics); investors should stay informed about uranium price trends, especially given the industry's sensitivity to factors like limited sulfuric acid access and construction delays. Additionally, be attuned to policy changes and climate action directions, as governmental decisions can significantly shape the nuclear energy landscape. A comprehensive approach that integrates these factors can help empower investors to make informed decisions in the dynamic uranium market.

It is also important to closely monitor territory exposure, considering geopolitical factors that may impact uranium production. Assessing the cost of borrowing and financial stability of companies in the sector is crucial for predicting their resilience in uncertain times. Keep a keen eye on investor sentiment, as market reactions can be influenced by perceptions of supply chain risks and production uncertainties.

As countries return to work to ensure food security while working on the energy transition: there are potential opportunities in the electric vehicle (EV), energy supply, and fertilizer sectors.

At COP28, the President of the French Republic and US Special Envoy for Climate revealed that the Declaration to Triple Nuclear Energy by 2050 was joined by more than 20 nations. 

Exelon is the US’ largest electric delivery company, serving as the electric and natural gas company in several large population centers in the country.