Our Equities Trader, Joseph Raad, discusses macroeconomic themes for the month of September.
The Fukushima Daiichi nuclear disaster in 2011 saw uranium’s hopes of becoming a global renewable energy source seemingly wither away as the spot price decreased from USD72/lb to as little as USD18/lb over the course of five years.
However, the commodity has seen a resurgence of late that has raised the question,
“Is this fresh wave of optimism temporary or permanent?”
Uranium’s most recent five-year high of USD35/lb has resurged hopes that the restart of many companies’ mines has indicated the shake off of the global demand issue that resulted in a multi-year bear market. The Paris Agreement, alongside other nations’ independent climate change-tackling initiatives, has seen a strong global push for renewable energy with plans for carbon emissions to be completely stamped-out over the next couple decades. The disposal of uranium waste, which has historically been a significant subject of conjecture, is now deemed safe, and with expected diminishing inventories coupled with increased sales, firms, such as Morgan Stanley, have a US48/lb forecast for the spot price by 2024.
445 of the world’s uranium reactors supply approximately 10% of global electricity, and the bullish sentiment adopted by funds and investors alike should see the demand for such an energy source grow. Benchmark Mineral Intelligence now forecasts this demand to grow seven-fold to 2.3 million tonnes over the ten years to 2030, with a market deficit growing to around one million tonnes, three times 2020 global supply.
“The industry has adapted to the challenges presented by both Chernobyl and Fukushima through the development and implementation of smaller reactors that are cheaper and easier to operate.”
Joseph Raad, Equities Trader, BPC
Many ASX stocks throughout 2021 have reaped the benefits of the strength in the underlying commodity price. Whilst many commodities have reached all-time highs, what is comforting for investors is that uranium is still approximately 45% off its highs in 2011 and 70% off its highs in 2007.
Stock Picks
Paladin Energy is a significant uranium miner and exploration company. Paladin’s 75% stake in the globally significant Langer Heinrich mine in Namibia leads this charge. Its long-life operations have already produced over 40 million pounds of U3O8 to date.
GTi Resources is exploring for uranium and vanadium in the Henry Mountains, Utah, USA a highly prolific region that forms part of the prolific Colorado Plateau uranium province which has provided the most important uranium resources in the USA. The Company recently acquired strategically located, under-explored uranium properties in Wyoming's Great Divide Basin.
Boss Energy has one of the few uranium projects ready to participate in the early stages of the new uranium bull market; it truly is a product for this time. Against a backdrop of strengthening uranium prices, the Company has been proactively identifying, addressing, and positioning the Honeymoon Project to be Australia’s next producer of up to 3.3M lbs per annum.
Led by a proven and experienced management team with an exceptional track record of uranium success from development to production, Deep Yellow (the Company) is advancing a dual-pillar growth strategy to establish a multi-mine, 5-10Mlb per annum, low-cost, tier-one uranium producer. The strategy is focused on organic growth through the development of the Company’s existing asset base in Namibia, with a Definitive Feasibility Study (DFS) in progress on the Tumas Project and inorganic growth through targeted M&A.
Summary
Conclusively, Uranium is positioned well to capitalise on the global push for renewable energy sources for years to come.
Read the Conversation:
Joseph Raad:
“I'm here today with our senior mining analyst, Alex Sutton. Alex, it's great to have you here today, mate. I just wanna quickly touch on Uranium. So the Fukushima nuclear disaster in 2011 saw Uranium's hopes of becoming a global renewable energy source seemingly with their weight. We saw the spot price decrease from 72 pounds to as little as 18 over the course of five years. The most recent surge, however, in Uranium has raised the question. Is this fresh wave of optimism temporary or permanent? What do you think, Alex?”
Alex Sutton:
“Yeah, I think it's here to stay. Demand from consumers is really coming from governments that are wanting a reliable and clean source of electricity for their citizens. This is driving our overall Uranium prices. It's translating into a 26% increase in demand in Uranium forecast over the next decade. And this is based on a 22% increase in reactive capacity for the same period.”
Joseph Raad:
“Wonderful. So the demand is, you know, obviously there, the appetite's there for investors, but where will the supply come from?”
Alex Sutton:
“Primarily the supply will come from mining, and the secondary supply will come from nuclear disarmament. There is a third source of uranium supply coming from stockpiling.
Joseph Raad:
“Well, we have seen many ASX stocks throughout 2021 and typically over the last couple months reap the benefits of the strength in the underlying commodity price, whilst many commodities have reached all time highs as of late, I think what's quite comforting for investors is that uranium is still approximately 45% off its highs in 2011 and 70% off its highs in 2007. With global initiatives such as the Paris Agreement and other nations independent climate change tackling initiatives, I think uranium is positioned well to grow in the future. Alex, thanks for your wonderful insight, mate. For all our listeners, some ASX uranium plays to keep an eye out for include Paladin Energy, GTI Resources, Boss Energy and Deep Yellow Limited. For more information about these stock picks and the Uranium spot price itself, book a call with me through the link below.”
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