- Spot uranium prices steady above $40 a pound
- Cameco chief executive says it is the "early innings" of a market recovery
“It is time.” The boss of Canadian uranium giant Cameco (CA:CCO), Tim Gitzel, was in fine form last week when he announced the reopening of the MacArthur River mine. He said it was time for his company “to claim [its] incumbency advantage and proceed with the next phase of our supply discipline decisions”.
This reopening will add 5mn pounds (lbs) of supply, although this will be balanced by a reduction at another mine. More significantly, Cameco also announced a massive 40mn lbs of supply contracts with customers had been signed just this year, compared with 30mn lbs in the whole of last year.
The uranium market is split into smaller spot trades and supply contracts where nuclear power producers and others lock in prices for years at a time.
The spot uranium price is now over $40 per lb, after trading around $30 until the second half of last year. Part of the market revving up has been the introduction of investment vehicles that hold physical uranium.
London’s Yellow Cake (YCA) was the first of these to be established, and holds just under 19mn lbs of uranium. “The more you’ve got vehicles buying in that spot market, the tighter it is going to be,” Yellow Cake chief executive Andre Liebenberg told Investors’ Chronicle this week. He added that the higher spot price made it “easier for utilities to justify contracting” supply, given contracts have remained at higher prices than spot markets in recent years.
In the last year, Yellow Cake has been joined by the Sprott Uranium Investment Trust (CN:U.UN) and the other key producer globally, Kazatomprom, announced its own vehicle in October. Gitzel at Cameco also flagged these major spot market buyers as an influence on prices going up, calling it a “thinning” of the market.
Liebenberg said Cameco signing 40mn lbs of long-term supply deals gave the miner the “confidence” to restart MacArthur Lake.
BMO Capital Markets analyst Alexander Pearce forecast lower overall production for Cameco of around 4mn lbs through to 2024, as he had assumed a 2023 restart at a higher level. Cameco has outlined an increase in production, though. By 2024, it will be operating 40 per cent below its production capacity, compared with 75 per cent below currently.
For Liebenberg, the “pendulum is swinging on the demand side” in the uranium market, given a renewed focus on nuclear power as a low-emission power source. The European Commission has recently included nuclear in its green financing taxonomy, while French president Emmanuel Macron has promised to build two new reactors to help with the country’s net zero emissions target for 2050.
Liebenberg even pointed to Japanese nuclear capacity coming back online as rising LNG and coal prices sent electricity prices 30 per cent higher year on year. Escalating costs are pushing people to overcome the "ideology hurdle" involved in backing nuclear power, he said.
