COMMODITY CAPERS: After years in the doldrums, uranium was surprisingly the best performer of 2023 and has already outperformed so far in the new year. By Kristie Batten

The uranium price started 2023 as it has started most years in the past decade – languishing at below US$50 a pound but reached $90/lb by the end of December, making it the best-performing mining commodity of the year.

Uranium has made a strong statement so far in 2024, rising by a further 25 per cent and cracking the $100/lb mark on January 12, the highest level since 2007.

Source: Google Finance

Australia’s only dedicated uranium fund manager, Tribeca Global Natural Resources Fund’s Guy Keller, continues to be bullish on the price.

Keller said in November last year, there were uranium contracts being signed at $200/lb.

“The question is what’s going to stop it moving above $100?” he said on a recent webinar.

Keller admitted he got laughed at last year when he suggested uranium could reach $175/lb in 2024.

“Here we are in January and people are saying ‘ooh, maybe that’s conceivable after all’,” he said.

Further tailwinds

There are currently 60 new nuclear reactors being built globally.

“We are at the beginning of what we believe will be a multi-year contracting cycle,” Keller said.

“For the utilities … 2025, 2026 is tomorrow for them.”

Keller said there were three rules for utilities.

“Rule number one: don’t run out of fuel. Rule number two: don’t run out of fuel. Rule number three: refer back to rule number one and rule number two.”

There have also been positive developments on the policy front, including an agreement to triple nuclear power by 2050 at the recent COP28 summit.

On December 11, the US House of Representatives passed a bill to ban uranium imports from Russia, paving the way for a Senate vote.

Canaccord Genuity analyst Katie Lachapelle recently said the Senate was more likely to pass the bill if it contained specific funding to support new domestic fuel cycle development, based on her discussions with industry participants.

“Also, who is to say that Russia doesn’t immediately retaliate and ban exports to the US? In our view, this would result in a rapid rise in prices,” she said.

“Our belief is that there is a very high chance of a Russian ban passing, but it is still up for debate whether this will happen with or without funding (US$2.72 billion in domestic fuel cycle funding has been proposed).”

Earlier this month, the US Department of Energy issued a request for proposals for uranium enrichment services to help establish a domestic supply of fuels using high-assay, low-enriched uranium (HALEU), the fuel used in small modular reactors and advanced reactors.

The US’ Inflation Reduction Act will provide up to $500 million for HALEU enrichment contracts.
Lachapelle said that while small modular reactors were still years away, they were designed to have longer refuelling cycles, which could support medium-term demand.

Supply and Demand

“Demand is durable, yet supply is as fragile as ever, and any further supply disruptions could lead to panic buying by utilities, in our view, with both US and European utilities already at low inventory levels,” Lachapelle said in January.

Keller sees a decade-long uranium deficit due to the nature of demand, which he described as long-term and inelastic.

Boss Energy’s Honeymoon restart in South Australia is commissioning but there are very few advanced projects in the pipeline globally.

“There is no wall of supply,” Keller said.

“It’s hard to bring any mine into production – it’s harder to bring a uranium mine into production.”
Keller said challenges included long lead times, permitting, financing and access to experienced people.

Complicating matters is the fact there’s several advanced assets in Western Australia that cannot proceed due to the current Labor government’s ban on new uranium mines.

“Just because we’re at $100/lb, it doesn’t mean we’re going to see a wall of supply,” Keller said.
Juniors

The buoyant market conditions have given junior uranium hopefuls a pep in their step, meaning uranium is sure to be a hot topic of conversation at this month’s RIU Explorers Conference in Fremantle.

Toro Energy (ASX: TOE), which holds the 26.4Mlb Lake Maitland uranium resource in WA, is one of the handful of uranium presenters.

“Advanced assets like Toro’s are few and far between,” Toro executive director Richard Homsany said.
Toro has been “patient and thick-skinned” as it waited for the market to turn.

“You have to be resilient, you have to think of ways to keep going,” Homsany said, pointing to the company’s foray into nickel exploration.

“We’ve got to remain patient again while we convince the WA government they need to reevaluate their policy on this.”