Uranium is back in the spotlight, with UBS highlighting a fresh round of optimism from Sprott, the world’s best-known uranium investor.
Sprott’s latest call left little doubt about its bullish outlook, but UBS finds the story on the commodity itself more compelling than the outlook for the listed uranium shares.
The Canadian outfit remains upbeat on market fundamentals, flagging that demand growth has shifted sharply.
“Sprott estimates demand has gone from around zero percent per annum five years ago to 3–4% per annum going forward,” UBS notes, with improved government support and a global tilt towards energy security now driving the market.
China continues to do the heavy lifting in terms of new reactors, while the United States has gained momentum following policy support from the last US administration. Europe, too, is now reversing previous nuclear phase-out decisions.
Supply, though, is still struggling to catch up. Sprott highlights that a decade of underinvestment means new uranium projects are few and far between.
Most greenfield developments are still stuck at the permitting or early funding stage, and even restarts have not come easily, as recent project updates have shown.
On pricing, Sprott’s message was clear. The current spot price, at roughly $70 per pound, is still where it was before the Fukushima disaster.
Adjusted for inflation, Sprott reckons the price “should be about $110 per pound on a nominal basis.” In the medium term, spot is expected to move closer to term contract prices. Sprott sees a long-term price of at least $80 per pound as necessary to incentivise fresh production.
The Sprott Physical Uranium Trust (SPUT) remains a major force in the market, operating under a model that only allows it to buy uranium when its shares trade above net asset value.
Since launching, SPUT has not sold a single pound of uranium, and, according to Sprott, fund liquidity would be the only reason to do so.
Even then, other options would be considered before selling, as shown by recent private placements and a $200m bought deal, which put the trust in a position to start buying again.
There are limits to how much SPUT can purchase each year, set by regulators, but the trust is well within its 2025 ceiling of 9 million pounds.
Looking ahead, UBS points to the World Nuclear Association Symposium in September as a likely catalyst for a pick-up in contracting activity, with the current contracting cycle running at about a third of replacement levels.
Recent news of a Korean tender for 9 million pounds starting from 2027 and a new offtake agreement for NexGen Energy add to the positive momentum.
UBS’s preferred pick in the sector remains Paladin Energy, which it rates a buy, describing it as “relatively better positioned versus some of its peers that have recently fallen behind.”