Uranium glows as market lifts

AUSTRALIAN uranium producers Paladin Energy was a favourite among investors at the recent Noosing Mining Conference in Queensland.

AMP Capital co-portfolio manager Matt Griffin said uranium was an exciting commodity.

“Over the next couple of years it looks like the most fundamentally solid market,” Mr Griffin said.

“We’ve got China opening new reactors, so the demand side is growing fairly slowly — but it is growing.”

With China’s ‘ One Belt One Road’ initiative, analysts expect the country could build as many as 30 reactors by 2030.

Japan’s government has also adopted a new energy policy that suggests the country must rely on a larger share of nuclear and renewables to slash its carbon emissions and meet its target of a 26pc reduction by 2030.

Mr Griffin said it was only a matter of time before the uranium price really kicked up but that the spot price would have to hit around $40-50 to rebalance the market.

“At that kind of price we’d do very well in uranium equities,” he said.

“While it hard for me to sit here and say over the next couple of months you’re going to make a lot of money, the foundations are there, and the recent section 232 news was positive for the sector.”

The section 232 announcement out of the United States centred on President Donald Trump declining issuing quotas for US domestic uranium production, and calling for a 25pc quota on uranium to limit imports in support of US producers – a welcome boon for producers like Paladin.

The company had put its Langer Heinrich mine in Namibia, and Kayelekera mine in Malawi, on care and maintenance due to the sustained low uranium spot price, but commenced feasibility studies in March of this year, aimed at re-positioning the Langer Heinrich operation for a restart when a suitable uranium incentive price is reached, and also to develop opportunities to reduce operating costs and potentially recover vanadium.

And the market is certainly looking up. Paladin chief executive officer Scott Sullivan welcomed Mr Trump’s decision as good news non-US producers.

“Since the petition was lodged early last year, we have seen a reluctance by both US utilities and non-US utilities to enter into long-term off-take agreements with producers and instead they have drawn down their inventories, which has contributed to suppressed uranium prices,” Mr Sullivan said.

The decision is expected to encourage additional buying activity and contribute to improved market conditions moving forward.

“Now that we have President Trump’s decision on the petition and have finally removed the uncertainty that has prevailed in the market, we expect a normalisation of the term market to follow and strengthening prices moving forward.”

Paladin continues its focus on Langer Heinrich with a rapid restart strategy expected to be completed in September 2019.