Uranium supply will need to increase significantly to meet the market’s needs if nuclear is to become a key source of energy in the global push to reduce carbon emissions.
Demand for uranium to fuel the world’s nuclear reactors is anticipated to rise to 79,400 metric tonnes of elemental uranium (MTU) by 2030, up from 62,500 MTU in 2021, with that number expected to climb to 112,300 MTU in 2040, according to a report by the World Nuclear Association.
Worldwide uranium supply has been constrained in recent years. Civil unrest in Kazakhstan, sanctions on Russia, and physical uranium exchange traded funds (ETFs) purchasing pounds from the spot uranium market have all added to the strain, and mine closures (including McArthur River, Cigar Lake, Rossing and Husab) over the past five years have subtracted more than 30% of available uranium from the global supply chain.
Spot uranium prices, meanwhile, have almost doubled in the last two years, from US$31 a pound to the current price of around US$53 a pound, although uranium stocks have largely lagged the price gains generated by the underlying commodity.
With spot uranium up 94% since 2020, uranium is now coming back onto the radars of investors, according to Proactive's mining analyst Alastair Ford.
"A strengthening of the price would likely lead to the reopening of shuttered mines, increasing supply and putting a ceiling on the upside that corresponds to the floor on the downside," Ford said. "But in between the floor and the ceiling there is room for manoeuvre."
Uranium supply/demand fundamentals have never been stronger
For example, even though industry giant Cameco Corporation (TSX:CCO) has seen its stock price surge 28% year to date, it is still well off its 2007 high, while shares of top development play Nexgen Energy Ltd (TSX-V:NXE) have gained 30% over the past 52 weeks but are still more than 20% lower than its all-time high in April 2022.
Some analysts believe that supply/demand fundamentals for uranium have never been stronger.
PI Financial believes that NexGen stands out amongst peers longer term for the development potential and cash-flow upside unlocked by its flagship Arrow deposit, Canada’s largest high-grade development-stage uranium resource.
While analyst coverage has focused predominantly on producers and larger development plays, shares of smaller uranium explorers are also positioned to get a big boost.
One company in particular is Anfield Energy Inc. (TSX-V:AEC, OTCQB:ANLDF). The firm is focused on near-term production from its Shootaring Canyon mill, Velvet-Wood and Slick Rock projects located in the western United States.
Shootaring is one of only three licensed, permitted and constructed uranium mills in the US, with surface stockpiles at the facility that include an estimated 370,000 pounds of uranium oxide at an average grade of 0.147%.
Anfield also owns 100% of the West Slope project in Colorado, which hosts nine historic uranium and vanadium mines with an Indicated resource estimated at 5.4 million pounds of uranium oxide.
The company recently announced a deal to acquire the Marquez-Juan Tafoya uranium project in New Mexico from enCore Energy, which will increase its uranium resource base by more than 60%. Marquez-Juan Tafoya has an historical Indicated uranium resource of 18.1 million pounds at an average grade of 0.127% uranium oxide.
Anfield is more than 30% owned by enCore Energy and Uranium Energy Corp. (NYSE:UEC).
Significant long term opportunity: Anfield CEO
For companies operating in the US, the recently enacted Inflation Reduction Act outlines support for existing and new nuclear development through investment and tax incentives for both large, existing nuclear plants and newer, advanced reactors, as well as HALEU and hydrogen production.
Corey Dias, Anfield's CEO, called it a "fantastic opportunity" for companies like Anfield, which have a path to domestic uranium production.
"This long term opportunity to wean the US domestic utlities off of Russian or foreign-owned supply is a significant one," Dias told Proactive recently.
Bull market just getting started
North of the border, in Saskatchewan, lies the Athabasca basin, home to the Arrow deposit and multiple other promising uranium plays.
Canadian junior Baselode Energy Corp (TSX-V:FIND, OTCQB:BSENF) controls 100% of about 264,172 hectares of exploration land in the Athabasca region.
The company is planning 10,000 metres of diamond drilling at its ACKIO near-surface, high-grade (greater than 0.5% uranium oxide) uranium deposit during the third quarter of this year, along with resource estimate calculations expected to begin in 4Q.
"As long as the nuclear industry is still moving forward, uranium -- the feed source for nuclear power -- is still going to be strong," Baselode CEO James Sykes told Proactive in an interview last year.
The current uranium bull market seems to be just getting started as demand for the yellow metal heats up. Fundamentals are strong, and new political incentives are in place to spur nuclear development.
The real upside is often much further down the value chain, in exploration, as Proactive's mining analyst Alastair Ford noted.
"Opportunities for finding uranium in safe jurisdictions - away from the covetous eyes of sequestration-minded governments – still abound, especially in Canada, the US, and Australia."
Contact Sean at sean@proactiveinvestors.com