Uranium Spot Price Dips from Recent Peak - Momentary Pullback or End of Recent Rally?

• Uranium spot prices climbed from $61 to $70/lb recently but have softened around $70, sparking debate around next price moves
• Kazatomprom announced plans to increase production to 100% of capacity by 2025, adding 6,000 tonnes of supply
• 92 Energy and Constellation Energy both had wins with drilling success and nuclear fleet reliability
• South Korea's previous phase out plans cost nearly $7B, but new government will nurture nuclear
• Fundamentals still appear bullish for uranium despite volatility; SPUT redemption proposal adds uncertainty

The uranium market has seen several notable developments over the past month that have impacted spot prices and led to increased volatility. In this investor-focused review, we provide an update on key events, winners and losers, and assess the potential implications going forward.

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Uranium Spot Price Update

Since our last energy show recording on August 31st, the uranium spot price has climbed from $61.35 to $70/lb, an appreciation of nearly 14%. This rise was driven by increased buying interest in the spot market as well as by the Sprott Physical Uranium Trust (SPUT), which has continued to acquire large amounts of uranium.

However, over the last two trading sessions, we have seen some softening in the spot price after hitting a recent high of $73/lb. This could represent a temporary pause and profit taking after the steep climb, or it could signal that the market will consolidate around $70/lb in the near-term. Market participants are closely monitoring price action to glean insights into where the spot price may head next. Overall, it appears momentum remains to the upside, but some potential resistance has emerged around $70.

Kazatomprom Production Announcement

A significant development was Kazatomprom’s announcement of their 2025 production plan. This will see the Kazakh mining giant increase output to a level equivalent to 100% of its subsurface mineral use contracts for the first time since 2018. The added production could amount to 6,000 tonnes of uranium re-entering the market.

The news led to some profit-taking in uranium equities, with the SPUT trading at a 9% discount to its net asset value after the announcement. However, the implications may not be overwhelmingly bearish. Much of this added Kazakh supply was expected by the market, and the ramp up is gradual. With demand increasing, inventories declining, and uncertainty around Russia’s role, Kazatomprom’s capacity growth may not undo the bull case for uranium.

Winners of the Week

We have a tie for winner of the week between 92 Energy and Constellation Energy.

92 Energy deserves recognition for the successful drilling of its Gemini prospect in Australia over the summer. Recent results revealed a new parallel uranium mineralized structure, highlighting significant growth potential for the asset. This is a promising exploration success for the company.

Constellation Energy also had a standout couple of months. Its carbon-free nuclear generating fleet operated at near 100% capacity over the summer amidst the hottest temperatures on record in the U.S. This remarkable performance highlights the reliability and climate-friendly advantages of nuclear power. It comes on the back of years of innovation that has made Constellation's reactors best-in-class.

Bungle of the Week

The title for bungle of the week goes to South Korea’s previous administration under President Moon. Analysis shows that the misguided nuclear phase-out policy led to nearly $7 billion in economic losses just from delayed commissioning of two new reactors. Fortunately, the new government appears committed to changing course and nurturing nuclear power.

Key Questions

One topic worth exploring is the implications of France withdrawing from uranium mining in Niger. This could remove around 3,000 tons of uranium supply from the market. With France heavily reliant on nuclear power, they remain a major uranium consumer. The mining decision seems politically driven, but could it affect access to supply? This bears monitoring.

Looking Ahead

Overall, market developments remain broadly positive for uranium, although some risks have emerged. SPUT’s potential redemption feature could be a game-changer or a dud. While volatility may persist, the long-term fundamentals appear strong. Nuclear power’s role in energy transitions and energy security is increasingly recognized. With demand rising, mines idled, and inertia around new projects, the uranium bull case looks intact. Periodic pullbacks on short-term issues do not change this multi-year outlook.

Siobhan Lancaster Joins The Energy Show

We were delighted this week to welcome Siobhan Lancaster as a guest contributer to our Energy Show. A uranium industry veteran with over 10 years of experience having worked on projects in Australia, Namibia, and Canada, Lancaster will provide unique insights into uranium production and mining from her latyest position as CEO of an ASX uranium junior with interests in thr Athabasca Basin, Canada. Siobhan kicked off her first spot by presenting an informative overview of the global uranium market - a great introduction for those new to the sector, and a great birds-eye refresher for those more seasoned uranium thesis followers.

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