Explosive commodity’s a glowing opportunity
THE role of nuclear power in world decarbonisation has spurred the uranium price, with a widening supply gap tipped to add further support to the coveted commodity.
As with any “stronger for longer” story, there are risks – such as a direct hit on a Ukrainian atomic facility creating another Chernobylstyle disaster.
However one can hope even Vladimir Putin realises that deliberate damage to a nuclear facility could create the most spectacular own goal seen outside of Qatar as radioactive wind blows over the border.
Tribeca Investment Partners uranium watcher Guy Keller acknowledges the “perceived market risk” of damage to a Ukrainian reactor but says it would take a very deliberate military strike to inflict any real damage. While no radiation is likely, a billowing cloud of souring uranium sentiment could subdue the price and create buying opportunities.
The International Energy Agency forecasts nuclear power generation to rise by 53 per cent by 2050, based on current plans, but to meet the target of net zero emissions output would have to double. Uranium – like lithium – is not exactly rare, but the best deposits tend to be found in the wrong places: Russia’s staunch ally Kazakhstan accounts for 40 per cent of supply, while Russia makes enriched reactor rods.
While there is no embargo in place, there is a yearning for alternative supply. With this in mind, Pac Partners showcased nine Asx-listed uranium beauties, including the recently listed 92 Energy (ASX: 92E) and what chief executive Siobhan Lancaster dubs as “humungous grades” at its GMZ discovery in Canada’s Athabasca Basin.
Athabasca hosts Cigar Lake and Mcarthur River, two of the world’s richest uranium deposits. Lancaster notes that in most uranium provinces, grades are measured in parts per million. 92 Energy encountered a 42m intersection averaging 0.62 per cent uranium oxide, including a 6m sub-interval at 2.17 per cent. That’s 21,600 parts per million, whereas elsewhere 250ppm would be seen as a decent grade.
Elsewhere, Aura Energy (ASX: AEE) is at front-end engineering and design stage at its Tiris project in Mauritania. Aura anticipates producing three to five million pounds in the second stanza of the two-phase mine plan, with initial output of 800,000lb.
Despite the uranium hype, there’s a gap between the performance of the uranium stocks, vis a vis the commodity itself. In some cases, be wary of sipping the (glowing yellow) Kool-aid.
According to Canadian mining investment group Sprott, the value of a basket of global uranium miners declined 18 per cent in the year to October, compared with the commodity’s 17 per cent increase. For investors who prefer physical exposure, keeping a barrel of yellowcake in the shed is problematic.
A more palatable option is the Sprott Physical Uranium Trust, which holds 59 million pounds of the stuff and is the only listed vehicle of its ilk.
This story does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.