Bannerman Resources (ASX:BMN) is seeing signs of a potential recovery in the uranium market as a major fund has joined its register following an 18% bounce in the uranium price to US$21.10 per pound.
A line of 25 million Bannerman shares was purchased on market by a major Australian institutional fund manager with over A$16 billion of listed equity funds under management.
Brandon Munro, CEO, told Proactive Investors exclusively: “We have seen a sharp uptick in interest in the uranium sector as the smart money positions for the commodity bottoming out.
“The spot price bounce in the last week has taken many by surprise.
“We have seen a number of utilities and traders entering the spot market, which is unusual for this time of year and bodes well for 2017.”
Bannerman’s flagship Etango uranium project is the world’s largest uranium project that is not held by a state owned entity or major.
Uranium price action
An exchange traded fund (ETF) that is seen as representative of the uranium mining space, Global X Funds (NYSEARCA:URA), has rallied 15.9% since the start of November.
During the September quarter, four new nuclear reactors went online globally, taking the total to nine in the first three quarters of 2016.
Looking ahead, the number of nuclear reactors going online will start increasing with 57 nuclear reactors around the world currently under construction and a further 167 reactors planned for the next decade.
Almost 40 new reactors will become operational by 2019, which will drive uranium demand in the medium term.
The new reactors coming online are expected to increase demand by 20% on the current annual consumption of 174 million pounds.
Background
Bannerman’s Etango Project is located near Rio Tinto Ltd’s (ASX:RIO) Rössing uranium mine, Paladin Energy Ltd’s (ASX:PDN) Langer Heinrich uranium mine and China General Nuclear Power Corp’s Husab uranium mine.
A definitive feasibility study (DFS) has confirmed the technical, environmental and financial (at consensus long term uranium prices) viability of a large open pit and heap leach operation.
Based on the DFS, production is expected to be 7-9 million pounds U3O8 per year for the first five years and 6-8 million pounds U3O8 per year thereafter.
Since 2015, Bannerman has conducted a large-scale heap leach demonstration program to provide further assurance to financing parties and generate process information.
Recent results from the heap leach demonstration plant Etango identified a number of opportunities to reduce operating and capital cost estimates from the DFS.
Current mine life of 16 years from a reserve of 130 million pounds U3O8 has significant expansion potential through the conversion of existing Inferred Resource as well as the deposit being open at depth.
Environmental clearance and accessible infrastructure positions the project for financing once the uranium price recovers.
Analysis
The securing of a new major fund manager as a shareholder in Bannerman provides further evidence that the uranium market is positioned for a rebound.
Bannerman recently secured $4 million in an oversubscribed placement, which saw Resource Capital Funds (a mining-focused private equity firm with a strong focus on governance and due diligence) support the raising.
The increasing support from investors shows the institutional grade investment Etango represents.
As market sentiment for uranium shows signs of improvement, the Etango project continues to emerge as one of the world’s largest undeveloped uranium projects, a fact that gives Bannerman sector-leading valuation leverage to a uranium price recovery.
Bannerman shares have proven resilient and are trading up 19% over the past month, currently priced at $0.031.
Funding from the recent successful equity raising secures a busy work program going forward for Bannerman, with the majority to be used for engineering designed to assess and quantify opportunities to reduce Etango project cost estimates.
The raising also provides Bannerman with working capital that will fund the company into 2018.