Source: Streetwise Reports 09/10/2024
One of the most important elements for the energy transition is uranium. Find out why the head of a company with an extensive project portfolio searching for the commodity in Canada's Athabasca Basin thinks we are still in the early days of an sustained bull market.
One of the most important elements for the energy transition is the fuel for nuclear power — uranium. It rose to US$106 per pound in February, but the market has seen some volatility since, with prices hovering in the US$90s and US$80s. It was about US$80 on Monday.
But a U.S. ban on Russian uranium has left some utilities uncertain about where to source their fuel in the future, and the largest producer in the world recently slashed its planned production for next year.
Add to that a dwindling supply of secondary sources, which include uranium in stockpiles and decommissioned nuclear weapons, and higher prices could still be on the way.
"Some people, especially speculators in the market with uranium stocks, have commented that we're in a bull market that may be getting long in the tooth" said President and Chief Executive Officer Jordan Trimble of Skyharbour Resources Ltd., an explorer and prospect generator with a large portfolio of uranium projects in Canada's Athabasca Basin. "But I would disagree with that wholeheartedly . . . I think we're still very much in the early innings of a bull market."
By background an entrepreneur and CFA Charterholder, Trimble has worked in various roles in the mining industry including in senior management, shareholder communications and corporate development. Before running Skyharbour, he was the corporate development manager for Bayfield Ventures, a gold company acquired by New Gold in 2014.
He sat down with Streetwise Reports recently to talk about the state of the uranium sector, where he sees it going from here, and why.
EVs + AI = Major Demand for Electricity
Experts agree that the world will need a lot more energy soon, and nuclear will have to be a part of it. The electricity needed for artificial intelligence (AI) and electric vehicles (EVs) alone will add 290 terawatt hours (TWh) of new demand to utility systems by 2030, according to Rystad Energy.
"Overall, the combined expansion of traditional and AI data centers, along with chip foundries, will increase demand cumulatively by 177 TWh from 2023 to 2030, reaching a total of 307 TWh" noted Rystad, an independent research and energy intelligence company. "Despite data centers currently representing a relatively modest portion of total electricity demand in the U.S., this marks a more than two-fold increase compared to 2023 levels, which stood at 130 TWh, highlighting the efforts of the U.S. to position itself as a global data center hub."
Rystad said the reliance on coal in the U.S. has diminished. This is expected to continue while overall power generation is expected to rise, including nuclear.
IG Bank noted that Morgan Stanley has estimated a nuclear renaissance could be worth US$1.5 trillion through 2050 in the form of capital investment.
According to the World Nuclear Association, about 60 new reactors are under construction worldwide — 30 in China alone — and a further 110 are planned.
John Ciampaglia, chief executive officer of Sprott Asset Management, told MarketWatch's Myra P. Saefong that there has been "a steady increase for uranium through 'nuclear-power-plant life extensions, 'power uprates,' and new-build programs."
Power uprates refers to the process of increasing the maximum power level at which a commercial nuclear-power plant may operate.
The supply deficit for 2025 is looking to be around 20 million pounds, he said, as supply has been "slow and new production keeps being delayed." Sprott Asset Management "doesn't expect any meaningful new mine production for at least four years" he said.
The Catalyst: A Major Announcement
The largest major catalyst in the present is the recent announcement made by Kazakhstan's National Atomic Company Kazatomprom (OTC: NATKY), or KAP, which is the largest uranium producer in the world, with Kazakhstan accounting for 40% of the global supply.
KAP lowered its production plans for next year, cutting its uranium-output forecast to between 25,000 and 26,500 metric tons of elemental uranium, or tU, from its initial "intention" for a volume of 30,500 to 31,5000 tU, according to the MarketWatch article. The new forecast would still represent about 12% growth above the company's 2024 guidance.
Between the increasing need for new supply and the dwindling of secondary supplies, Trimble said, "there are a lot of reasons to be optimistic" about the trajectory of the uranium market going forward.
"This is the first time ever that we haven't been in an era of abundant secondary supply" Trimble said. "We're going to see continued upward pressure on the uranium price. We simply do not have enough new supply coming on quickly within the next few years to meet the growing demand."
Seasonality in the Market
Trimble said there is also traditionally a seasonality to the uranium market in that August can often be a low ...
