In this interview Fabi Lara from thenextbigrush.com shares her views on the state of the uranium market
1. What is the thesis underpinning your long-term bullish Uranium outlook?
So, the basic pieces for uranium in the long term have been for a good while now demand versus supply. With this market in particular, we have the benefit of being able to look forward several years because everything happens very slowly in the nuclear sector, and on top of that, utilities need to stockpile uranium in its many different forms for many years before being in a critical position of needing urgent material. It’s something that cannot be replaced and bringing a uranium mine online is extremely difficult extremely expensive and extremely slow.
This sets up the perfect scenario for patient investors to see the current growing demand from now going into the future and observing that the new supply will have to come after a long time of higher prices. It used to be that $60 per pound was a good incentive price for new production to come online this is no longer a valid number. It is looking more and more like 70 to $75 or more depending on the jurisdiction.
2. With regard to the short-term, what prospects do you foresee for uranium as a commodity, and which fundamental aspects influence this prediction?
So, we’re in a very interesting stage of this bull market where we see the spot market going up in price on a daily basis. The move from $60 per pound to 70 maybe $72 per pound when this goes out it has been extremely fast. One of the reasons is that the secondary supply of uranium is virtually gone and when you take a look at the primary supply from producers such as Cameco in Canada and Kazatomprom in Kazakhstan you will see that their order books are pretty full.
Not completely full, but mostly committed from now until 2027 or so. Added to that, is the fact that the political situation in Niger the world’s 5th largest producer which accounts for 5% of the world’s output of uranium has made exports of uranium from that country a big question mark. So short term we have an extremely thin market for a material that does not have a replacement and end users that must absolutely go to market in order to fill their needs.
On top of that Rosatom which is the Russian nuclear giant allegedly has an RFP out a request for proposal and they’re known to be a large producer of nuclear fuel, so they were structurally short uranium and are now looking to top up. This just goes to show that the whole sector was always counting on the fact that material would be cheap and easily available and that’s proving to not be true.
I don’t know how high we’re going to get in the cycle, but I cannot imagine us not reaching at the very least $140 per pound, which is the previous nominal high from 2007 inflation adjusted that would be $200 per pound. And I believe we can get there some friends of mine also believe we will far surpass it. I’m not counting on that, but I also don’t discard that as an option
3. Focusing specifically on uranium equities in the short-term, could you elaborate on your expectations and the significant indicators that guide this perspective?
I have been saying for some time now that uranium developers aren’t nearly as cheap as they used to be. They have had to raise a lot of money and to dilute for many years. And the studies that have been made for most of these companies, have been based on a price of uranium that we had not yet reached. Well, I think we’re reaching that stage where we need to go back to these studies, and yes account for inflation further costs, but also to understand that we might be looking at a year-end price of 80 to $100 per pound. That changes the situation of most deposits extremely quickly.
We might be entering a stage where soon enough deposits that were not economic will within 12 months or so become economic and we may have whole jurisdictions that come alive very, very quickly. When that happens you could see prices for the stocks to double, triple, quadruple in very short order. So for the companies that have pounds in the ground, this is a crucial moment.
I’m also looking at exploration juniors and it seems like the Athabasca Basin is very exciting, but there is something brewing in Nunavut, and it’s called the Phillion Basin. I think people should take a second look at Canada as a jurisdiction but not only the Athabasca Basin.
There is also a lot of uranium to be found in jurisdictions such as Quebec, which is not the current topic because there is currently a uranium mining ban and if that is lifted in the next little while you will see a lot of juniors flying with assets in Quebec. It’s a mining-friendly jurisdiction and the uranium is there not in such high grades as the Athabasca Basin but it’s definitely there. And when you have mineral resources that go from being valued zero to something then you get multiple baggers.