Gear Up for Triple-Digit Returns as Uranium Bull Prepares for Historic Run

• Uranium prices have risen from $50 to over $100 per pound over the past year, indicating tightening supplies
• Major producers like Cameco and Kazatomprom are struggling to meet production targets due to supply chain issues and lack of investment
• Much new production is proposed by inexperienced management and faces delays and uncertainty
• Western utilities have been slow to sign long-term contracts and are still benefitting from low-priced legacy contracts
• Demand forecasts show steady growth, especially with new SMR reactors, but supplies seem unable to keep pace

Uranium Prices on a Remarkable Run but Can Supplies Keep Pace?

Uranium prices have been on a remarkable run over the past year, rising from around $50 per pound in early 2023 to over $100 currently. However, despite bullish sentiment, major questions remain about whether supplies can rise fast enough to meet steadily growing demand over the next decade.

As expert industry consultant Dustin Garrow explains, “There’s a lot of greed going on – greed for profits, greed for big contracts.” However, he cautions that the industry faces critical shortages: “We need to produce, and produce a lot.”

Supply Issues Mounting for Major Producing Regions and Companies

Garrow points out that even major producers like Cameco are flagging delays and problems. As Garrow summarizes, “The start-up [at Cigar Lake] is slower, not surprising... and they’re citing things like supply chain, personnel training... and they’re now talking Rabbit Lake as the next incremental source project.” However, the aging Rabbit Lake lacks substantial resources.

Even industry leader Kazatomprom in Kazakhstan faces mounting troubles. Garrow warns, “You have pressure from the Russians and Chinese on Kazakhstan as a whole and Kazatomprom specifically.” Russia wants Kazakhstan’s uranium for its domestic reactors, while China has been locking up supplies to fuel its state-owned nuclear fleet.

Garrow warns that alternative supplies may not arrive fast enough: “From now to the end of the decade... where is the primary production going to come from?” He explains that repeated periods of low prices going back to the 1990s hollowed out Western mining capacity. Rebuilding will take extensive capital and likely a decade of effort.

New Projects Face Deep Uncertainty

What about the slate of potential new projects in the West and beyond? Unfortunately, most face deep uncertainties, especially since many management teams lack uranium project experience.

As Garrow summarizes, “There is a school of thought that says more than 80% of the new greenfield projects are proposed by management groups that have never produced a pound of uranium.” He explains that raising project capital will require very robust off-take agreements with utilities. But the Western utilities have been slow to engage.

Western Utilities Slow to Engage

Another key insight from Garrow relates to the sluggish Western utility engagement in new long-term contracting so far. He explains, “There was 160 million pounds put under contract last year in the term market. I’m not impressed with that. Show me 250 – it’s got to be more.”

In fact, Western utilities still rely extensively on older legacy contracts negotiated during periods of oversupply. Garrow notes, “Cameco...in 2025 if the spot price is $140, unless I’m wrong they get $66 under legacy deals.” He estimates the US utilities have paid only $37 per pound on average over the past five years.

So essentially, the utilities need to double their typical contract prices to spur investment in large new projects. But Garrow notes they’ve been “digging in their heels” so far. He comments, “Mr. Utility, I don’t want you to just pay more, I want you to double what you’ve been paying...And that is difficult for them to digest.”

Where Do Uranium Prices Need to Be?

Just where do uranium contract prices need to be to spur major new investment? Garrow suggests, “Before the run-up, there were, I think, a pretty good tranche between $70-$80...Producers said, yeah, $75 escalated – I can get my capital back, I can cover my costs, make a little margin, get me moving forward.”

He observes wryly, “I don’t know who’s offering $68 – they should perhaps reexamine their contracting strategy.” Ultimately, he foresees prices that give producers robust margins, likely rising to $120 or more. And he thinks the market now has “unpredictability on the upside.”

The Looming Risk of Supply Shortfalls

What about the risk of actual shortfalls in the coming years as older mines close down? Garrow comments, “We are at the point where that inventory overhang is not available...It’s also impacting things like location exchanges – in the old days, you did a paper deal...Now you can’t because inventory is so limited.”

He cautions that availability issues could start hitting reactor operations well before the extreme price thresholds required for demand destruction. Instead, “It won’t necessarily be the sellers being greedy, it will be the buyers saying what does it take to get that pound?”

But Can Mining Keep Up if Utilities Start Signing En Masse?

However, there’s a big question of whether miners can rapidly scale up even if utilities do urgently engage in contracting en masse to avoid shortfalls. As Garrow comments, “What happens if I need it – what do you pay? What’s it worth? And we’re quickly moving toward that kind of market.”

He suggests that it usually takes at least a decade to rebuild substantial capacity after long periods of underinvestment. Even newer ISR mines can face major delays if management teams haven’t proven they can permit and operate efficiently. So the gap between demand and available Western supplies seems unlikely to close rapidly.

Ultimately, these widening supply deficits likely require higher-cost mines to operate profitably, or alternatively, force more reactors to cut output for lack of fuel. Either way, the market shifts radically to sellers’ favour after decades of buyers’ dominance.

The Investment Thesis for Uranium

• Multi-year runway of supply deficits as demand grows steadily but mines struggle to rebuild capacity
• Term contract prices likely to nearly treble from the $37/lb average paid by US utilities in recent years
• Existing mines closing faster than new projects can replace them with long permitting times
• Buyout targets possible among juniors with lower-cost projects as utilities seek security
• Majors like Cameco also appealing with locked-in legacy contracts expiring and gaps to fill
• Geopolitical supply squeezes add volatility – Russia-Kazakhstan tensions, civil unrest in Niger
• Upside potential for five-year returns should easily reach triple digits for diversified portfolios

Uranium appears positioned for a major multi-year bull run as emerging supply shortfalls collide with hesitant utilities that have delayed securing new long-term contracts, benefiting from cheap legacy deals. Investors have a rare chance to exploit the transitions underway after a long bust cycle, potentially capturing exceptional returns as the market shifts back toward sellers’ favour across the supply chain while reactors require continuity of fuel supplies. But major questions hover around miners’ ability to expand rapidly enough as shortfalls hit, heightening volatility. By diversifying across uranium equities, investors can capitalize on soaring prices forecasts while mitigating project-specific delays.

Uranium Companies to Watch

Bannerman Energy

Bannerman Energy is an Australian uranium development company focused on advancing its flagship 3.5Mlb pa open pit uranium project in Namibia, a major global uranium producer. Bannerman is currently working on Front End Engineering and Design (FEED) and financing for the Namibia project. The company also holds a significant 41.8% stake in Namibia Critical Metals, developer of the large-scale Lofdal heavy rare earths project in Namibia, one of only a few heavy rare earth deposits outside China.

Ur-Energy

Ur-Energy is a U.S. uranium mining company well positioned to benefit from rising uranium prices driven by growing demand for nuclear power. Within-situ recovery operations in Wyoming, Ur-Energy has been producing from its Lost Creek facility since 2013 and can now effectively double licensed annual production capacity to 2 million pounds with its permitted Shirley Basin project. With over $70 million in cash, Ur-Energy is funded to ramp up low-cost production from its Wyoming hub as it restarts wellfield construction. The company utilizes mining methods with a light environmental footprint and advancing next-generation technologies to further reduce costs. If uranium prices continue strengthening, Ur-Energy offers leverage as an experienced producer with scalable, permitted projects in a rising uranium market.

Global Atomic

Global Atomic Corporation is a publicly traded company with two main divisions - a Uranium Division that is developing the large, high-grade Dasa uranium project in Niger, which is now fully permitted with excavation underway, and a Base Metals Division that holds a 49%stake in a zinc production joint venture in Turkey operated by Befesa. The joint venture recycles Electric Arc Furnace Dust to produce zinc oxide concentrate sold to zinc smelters globally. Global Atomic’s unique combination of uranium production and cash-flowing zinc operations positions it well for growth.

Energy Fuels

Energy Fuels is the largest uranium and advanced rare earth element producer in the United States. The company has significant uranium production capacity and long-term sales contracts with U.S. nuclear utilities that it expects to fulfil starting in 2023-2024. Energy Fuels is also quickly moving to establish a domestic rare earth element supply chain, with plans to produce high-value separated REE oxides by late 2023 or early 2024. The company additionally produces vanadium when conditions warrant, recycles materials to recover uranium, vanadium and medical isotopes, and is advancing capabilities for medical isotope production. Overall, Energy Fuels is a major U.S. producer of strategic minerals like uranium and rare earth elements that are critical for energy, technology, and medical applications.

American Lithium

American Lithium is developing large-scale lithium projects in Nevada and Peru as well as one of the world's biggest uranium projects, with the goal of playing a major role in the transition to sustainable energy. The company's assets are the advanced-stage TLC lithium project in Nevada and the Falchanilithium project in Peru, which have robust preliminary economic assessments. American Lithium also owns the Macusani uranium project in Peru, which has seen significant historical development. With assets at various stages of pre-feasibility and feasibility studies, American Lithium is positioned to be a major player in lithium and uranium mining.

Deep Yellow

Deep Yellow has systematically built a portfolio of high-quality uranium assets to establish a significant production platform and realize its vision of becoming a leading international uranium mining company. With its experienced leadership team at the helm, Deep Yellow has set its sights on diversified production of over 10 million pounds per year, capitalizing on forecast supply squeezes. Its flagship Tumas mine in Namibia already claims one of the world's largest undeveloped uranium deposits as Deep Yellow advances toward a 2024 construction decision. Meanwhile, its Mulga Rock project in Western Australia progresses through feasibility studies for targeted development. Beyond existing core assets, Deep Yellow has accumulated extensive exploration ground at two prime locations in Namibia and Australia's Northern Territory through strategic acquisitions. These prospects provide substantial opportunities for unlocking further discoveries to continually expand its project pipeline over time. As energy security needs escalate globally, Deep Yellow stands ready to deliver the reliable uranium production that transitioning electricity grids urgently demand. With its production timeline aligned with major forecast supply deficits, Deep Yellow aims to cement itself as the go-to uranium supplier of choice for nuclear utilities worldwide seeking security and diversity of supply. Backed by disciplined leadership, Deep Yellow represents an emerging industry force promising investors exposure to the full lifecycle of value creation across resource discovery, project development and multi-decade uranium production. By targeting low-cost mining jurisdictions, adopting proven processing technologies and securing key infrastructure advantages, Deep Yellow has systematically built itself to deliver sustainable investor windfalls as the uranium bull market unfolds.

Baselode Energy

Baselode Energy is a Canadian uranium exploration company focused on the Athabasca Basin area in northern Saskatchewan. The company controls over 264,000 hectares of land that is free of any option agreements or underlying royalties. In September 2021, Baselode discovered the near-surface ACKIO uranium prospect on its exploration properties. The ACKIO prospect measures over 375 meters long and over 150 meters wide, with at least 9 separate uranium mineralized zones. Mineralization starts as shallow as 28 meters and 32 meters beneath the surface, extending down approximately 300 meters depth, with most mineralization occurring in the top 120 meters. The ACKIO prospect remains open at depth and to the north, south and east for further expansion. Baselode's exploration strategy centers on discovering high-grade uranium deposits outside of the Athabasca Basin near the surface in basement rocks. The company uses innovative and established geophysical survey methods to identify prospective shallow drill targets for high-grade uranium mineralization related to underlying structural controls. This technique has led Baselode to the discovery of the ACKIO prospect.

Nucelar Fuels

‍Nuclear Fuels Inc. is a Canadian uranium exploration company focused on in-situ recovery (ISR) projects in Wyoming and other proven jurisdictions globally. The company's priority asset is the Kaycee project in the Powder River Basin of Wyoming. This project has historical uranium resources distributed along a 33-mile mineralized trend with over 110 miles of mapped roll fronts. The property has been drilled extensively with over 3,800 historical drill holes. Nuclear Fuels has consolidated control of the Kaycee district, acquiring multiple historical uranium deposits and exploration targets. This positions the company to potentially advance the project portfolio into production. Beyond Kaycee, Nuclear Fuels plans to leverage its technical expertise to explore additional uranium properties and opportunities in established mining districts globally. Through aggressive exploration and consolidation of historical resources, the company aims to develop a pipeline of projects, prioritizing those that can be fast-tracked to production using the in-situ recovery mining method.

IsoEnergy

‍IsoEnergy is a Canadian uranium exploration and development company with projects focused in the Athabasca Basin of Saskatchewan. The company's flagship property is the Larocque East project in the eastern Athabasca Basin. This project hosts the high-grade Hurricane uranium deposit, which has the highest grade Indicated uranium resource globally. In addition to its exploration projects, IsoEnergy owns several permitted, past-producing uranium and vanadium mines in Utah. These mines are currently on standby but can be rapidly restarted to position IsoEnergy as a near-term uranium producer. The company has a toll milling agreement in place with Energy Fuels Inc. to process ore from its US projects. Beyond its Canadian and US assets, IsoEnergy holds uranium projects in various stages of exploration and development in Australia and Argentina. This diversified portfolio provides leverage to rising uranium prices across different jurisdictions. The company is advancing its Athabasca Basin projects while continuing the exploration on its global assets to drive future production growth.

Atha Energy

ATHA Offers Leveraged Exposure to World-Class Uranium Districts Athabasca Uranium Inc. (ATHA) provides investors with targeted leverage to potentially significant uranium discoveries across some of the world’s most prolific regions for new supply. As a focused mineral exploration company, ATHA has methodically accumulated the single largest exploration package covering the renowned Athabasca Basin. Spanning over 6 million acres, their claims provide unrivalled exposure to this district which has historically produced high-grade uranium deposits. Additionally, ATHA holds extensive prospective ground in the similarly uranium-rich Thelon Basin. Between these two core holdings in prime Canadian uranium provinces, the company has positioned itself amongst acreage with a proven exploration upside. Importantly, a subset of ATHA’s Athabasca land package involves a 10% carried interest in claims operated by sector leaders NexGen Energy and IsoEnergy. With ATHA carried through key exploratory expenditures, this allows leveraged participation alongside seasoned management advancing projects in the basin. For investors, ATHA brings focused leverage to maximizing discovery potential across districts that have delivered huge economic uranium resources. As sentiment improves around uncovered uranium value still unearthed in these Canadian districts, ATHA offers a targeted way to ride the upside. Their vast claim packages in underexplored but prolific terrain form the springboard for potential mineral discovery and resource growth in the coming bull cycle.