Report
Ben Pirie ...
  • Nicholas Cortellucci, CFA

Uranium: Only Getting Started

What you need to know:
• Uranium spot prices are up 84% since our last report in late 2022, yet we still expect further momentum in the sector.
• The sentiment on nuclear power from governments around the world has begun to shift, with many nations ramping plans for reactors.
• While new mines begin production and future mines achieve financing, we continue to believe the current spot price is too low in the short term.

Since our initial thematic research report on uranium from November 2022 (read here), spot prices are up 84%, reaching highs of $106/lb in January 2024. This surge in prices was building up for years (perhaps decades) as demand steadily increased due to lofty decarbonization goals and future supply remaining uncertain. We continue to believe spot prices are too low to incentivize new production and there remains a runway for uranium prices to rally. As our previous insights and forecasts proved accurate, this report aims to update each component of our previous investment thesis for the various events that have occurred over the past 1.5 years.

Overview
Our previous uranium note highlighted key demand developments for nuclear energy as uranium spot prices remained stagnant through 2022. Many nations were incorporating nuclear energy into their strategies as countries strive to reach net-zero emission goals, a theme that continues today. Since then, numerous agreements and declarations have been signed by nations across the globe to triple nuclear power capacity by 2050. With this, uranium spot prices increased from $50/lb to $92/lb since our previous thematic note. As Russia’s invasion of Ukraine continues to play out, we have seen multiple sanctions from both the U.S. and European nations that have major implications on uranium pricing.

As for the supply side, a large rally in uranium spot prices has led to once-idled mines to come back online, as predicted. In addition to that, we spoke about the lack of greenfield supply and the 5–10-year delay in establishing production at new sites. Therefore, we continue to believe that uranium spot prices will rise over the next few years while capital is being deployed into greenfield projects.
Underlyings
Cameco Corporation

Cameco and its subsidiaries are engaged in the exploration for and the development, mining, refining, conversion and fabrication of uranium for sale as fuel for generating electricity in nuclear power reactors in Canada and other countries. Co. has three reportable segments: uranium, which explores for, mines, mills, purchases, and sells uranium concentrate; fuel services, which refines, converts and fabricates uranium concentrate, and purchases and sells conversion services; and electricity, which generates and sells electricity through its 31.6% interest in the Bruce Power Limited Partnership, which operates four nuclear reactors and manages the overall site in southern Ontario.

Denison Mines Corp.

Denison Mines is engaged in uranium mining and related activities, including the acquisition, exporation and development of uranium bearing properties and the extraction, processing and selling of uranium. The environmental services division of Co. provides mine decommissioning and decommissioned site monitoring services for third parties. Co. is also in the business of recycling uranium-bearing waste materials, referred to as "alternate feed materials", for the recovery of uranium, alone or in combination with other metals.

Energy Fuels

Energy Fuels is engaged in uranium mining, milling, development, and exploration with operating uranium mines, mines on standby, development projects and exploration properties located in the United States. Co.'s assets include its 100% ownership of the White Mesa Mill in Utah. Co. also produces vanadium as a co-product from some of its mines in Colorado and Utah. In addition, Co. recycles uranium-bearing waste materials, referred to as "alternate feed materials", for the recovery of uranium, alone or in combination with other metals, at its White Mesa Mill.

Fission Uranium Corp

Fission Uranium is engaged in the acquisition and development of exploration and evaluation of the Patterson Lake South uranium property, which hosts the Triple R uranium deposit. Co. is in exploration stage and has not yet determined whether its exploration and evaluation assets contain ore reserves that are economically recoverable. The recoverability of the amounts shown for the exploration and evaluation assets, including the acquisition costs, is dependent upon the existence of economically recoverable reserves, the ability of Co. to obtain necessary financing to complete the development of those reserves, and upon future profitable production.

ISOENERGY LTD

NexGen Energy Ltd

NexGen Energy is a Canadian based uranium exploration company engaged in the exploration of its portfolio of early stage uranium exploration properties located in the Province of Saskatchewan, Canada. Co.'s principal asset is its 100% interest in the Rook 1 project, an exploration project in the Athabasca Basin, Saskatchewan.

Paladin Energy

Paladin Energy is engaged in the development and operation of uranium mines in Africa, together with exploration and evaluation activities in Africa, Australia and Canada. Co.'s operating segments are Exploration, Namibia and Malawi. The main segment activity in Namibia and Malawi is the production and sale of uranium from the mines located in these geographic regions. The Exploration segment is focused on developing exploration and evaluation projects in Australia and Canada.

Ur-Energy

UR-Energy is an exploration stage mining company. Co. is engaged in in uranium mining, recovery and processing activities, including the acquisition, exploration, development and operation of uranium mineral resources located in the U.S. Co.'s principal operation consists of its primary in situ recovery uranium mine at Lost Creek Project in Sweetwater County, WY. As of Dec 31 2016, Co.'s land portfolio included 13 projects in Wyoming of which 10 were in the Great Divide Basin, WY, including its primary project, Lost Creek Project.

Provider
Atrium Research Corporation
Atrium Research Corporation

Atrium Research provides institutional quality issuer paid research on North American public equities using deep fundamental analysis. Our research reports are disseminated through Bloomberg, FactSet, Capital IQ, Reuters and many more, as well as through our social media and email distribution lists. 

Analysts
Ben Pirie

Nicholas Cortellucci, CFA

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