Commodities: Uranium
Headquartered in Saskatchewan, Canada, Cameco is one of the world’s largest providers of Nuclear fuel with a market capitalisation of US$12.3bn. Uranium sales make up around 70% of their earnings with their associated services make up the rest, however it’s their asset base that underpins their valuation and they are well positioned to take advantage of the worlds push into cleaner energy.
A slightly different take on the uranium story, Silex is developing a laser-enriched uranium technology in conjunction with sector giant Cameco. The demonstration plant in Kentucky is expected to be up and running in around 12 months’ time. The company is well funded following a capital raise earlier in the year while the US Government is also likely to support any capital requirements as part of the inflation reduction act. Supply of High Assay Low Enriched Uranium (HALEU), which the next generation of nuclear reactors require, is heavily reliant on Russia.
The global energy mix is changing as decarbonisation is one of, if not, the most dominant investment theme for the next decade. We believe Nuclear energy will become a larger slice of the energy mix, and we are seeing tangible evidence of this occurring. Uranium is traded primarily on term contracts, and so far this year nearly 100m pounds have been contracted. That is the highest amount of contracted Uranium in over a decade.
Peninsula are working towards a restart of their Lance Uranium Project in Wyoming, USA with first production due next quarter and sales expected to be booked before the end of the calendar year. The relatively low-risk Stage 1 restart comes with an existing contract book with supply agreements in place through to 2033 with major US and EU utilities. The second stage of the ramp-up will require a significant capital injection, though we expect markets and the US Government to be supportive of the investment which will likely reduce the cost of capital.
This ETF invests in Global Uranium Companies, it’s largest position being in Cameco (CMJ US) while the Sprott Physical Uranium Trust (U-U-CN) is it’s second largest weighting. Those two holdings alone account for 33% of the ETF. Paladin (PDN) is the largest ASX listed holding in the ETF accounting for ~4% of the Fund. While the URA is listed in the US, Global X do have a feeder fund listed on the ASX under code ATOM.AXW. A word of note, be careful trading this, waiting for market makers to participate in the market, & always use limit orders.
Shaw and Partners hosted its 3rd annual Uranium Conference yesterday with presentations from TradeTech, Peninsula Energy, NexGen Energy, Paladin Energy, Boss Energy, Okapi Resources, Lotus Resources, Silex Systems and Bannerman.
We attended a Uranium conference yesterday with a number of key industry speakers. The general feel across the board is that the market continues to tighten, and while a supply response will follow, uranium is expected to be in deficit for some time given long lead times for most projects which is supportive of prices.
Cameco Corporation is an integrated uranium supplier, offering refining, conversion, and fuel manufacturing services. The Company operates two segments: uranium and fuel services. The uranium segment involves the exploration for, mining, milling, purchase, and sale of uranium concentrate. The fuel services segment involves the refining, conversion and fabrication of uranium concentrate and the purchase and sale of conversion services. The Company also provides nuclear fuel processing services. Its uranium projects include Millennium, Yeelirrie, and Kintyre. The Cree Extension-Millennium project is a Cameco-operated joint venture located in the southeastern portion of Canada’s Athabasca Basin. The Yeelirrie deposit is located approximately 650 kilometer (Km) northeast of Perth and approximately 750 km south of Cameco’s Kintyre project. Kintyre project is located at the western edge of the Great Sandy Desert in the East Pilbara region of Australia.
