Uranium Market Poised for Breakout as Supply Tightens and Demand Soars

• The US has passed legislation banning Russian uranium imports from 2028-2040, with a potential 90-day waiver process in the interim
• This creates uncertainties but also closes the door on utilities relying on cheap Russian supply in the future
• $2.7B in funding is now available to support domestic US enrichment, but new capacity will take years to come online
• Demand for uranium is growing globally with new reactors, SMRs, and nuclear-powered data centers
• The uranium market is in transition, with higher prices needed to incentivize new production, given declining inventories

Clean Energy Fuel Presents Timely Investment Opportunity

The global uranium market is undergoing a major transition, presenting a compelling opportunity for investors. Recent geopolitical developments, growing demand for carbon-free energy, and supply constraints are converging to create a favorable environment for uranium prices and mining companies. This article examines the key drivers behind the bullish uranium thesis and why now may be an opportune time for investors to gain exposure to this critical commodity.

US Sanctions on Russian Uranium

One of the most significant developments in the uranium market is the recently passed US legislation banning Russian uranium imports from 2028 through 2040. The bill, which received unanimous support in the House and Senate, includes provisions for a 90-day waiver process in the interim. However, the details of the waiver process remain uncertain, with the Department of Energy expected to provide more guidance within 30 days.

The ban on Russian uranium creates challenges for US utilities that have previously relied on cheap Russian supply.

As Dustin Garrow, a nuclear fuel expert, explains, "The utilities are appearing a little uncomfortable that they don't want to be now individually identified as supporting the Russian efforts in Ukraine." This sentiment, combined with the certainty of the total ban starting in 2028, is forcing utilities to reevaluate their fuel procurement strategies.

While the legislation frees up $2.7 billion in funding to support the domestic US uranium enrichment industry, meaningful new capacity will likely take years to come online. In the meantime, utilities will need to secure alternative sources of uranium, which could put upward pressure on prices.

Growing Global Demand

Another key factor driving the bullish uranium outlook is the growing global demand for nuclear energy. Countries worldwide increasingly turn to nuclear power as a reliable, carbon-free energy source to help meet their climate goals and energy security needs.

In the United Arab Emirates, for example, four new reactors are planned to start operating by 2032. Even Italy, which previously shut down its reactors, is now looking to re-enter the nuclear industry. In the US, the Diablo Canyon plant in California was recently saved from decommissioning, and the Palisades plant in Michigan is being recommissioned by Holtec International.

Small modular reactors (SMRs) are also gaining significant traction globally and are expected to play an increasingly important role in meeting future energy demand. Garrow notes, "We're starting to see that gain significant traction, even if they're in conjunction with large baseload units... Poland is Big units plus SMRs."

Another emerging source of demand for nuclear power is data centres. These energy-intensive facilities are increasingly co-located near nuclear plants to access reliable, clean power. As Garrow explains, "The word is they want to embrace SMRs so it's not all 2030 plus somewhere out in the future we don't have to worry about it I think somebody needs to focus on what the SMR Market looks like there was what the McKinsey report 22 gigawatts have been announced albeit it's a lot more than that now."

Tightening Supply

On the supply side, the uranium market faces several constraints that could limit the ability of producers to ramp up output in response to higher prices quickly. One key issue is a shortage of skilled labor. As Garrow points out, "If you're a supplier, there's more than enough market out there at increasing prices and I'm hearing like in South Texas the insitu guys can find some oil and gas labor that will move into the Uranian side, but when you get to Wyoming or elsewhere Utah not quite so abundant so it's going to take a while for these companies to acquire Staffing and then they're going to have to train them up."

In addition to labor constraints, many uranium mines have been shut down or placed on care and maintenance in recent years due to persistently low prices. Restarting these mines will require significant capital investment and time.

As Garrow notes, "It concerns me that the bankers and the journalists think they can walk backwards into the future and, oh, it just happens again. We'll have a peak, and here comes the inventory. Well, you have to have the inventory available, and it's not available anymore."

The Investment Thesis for Uranium

• Sanctions on Russian uranium are forcing US utilities to secure alternative supply
• $2.7B in US government funding for domestic enrichment signals long-term policy support
• Growing global demand for new reactors, SMRs and nuclear-powered data centers
• Supply constraints due to a shortage of skilled labor and idled production capacity
• Declining inventories as the market shifts from surplus to deficit

For investors looking to gain exposure to the uranium market

• Investing in individual uranium mining companies with quality assets and experienced management teams
• Buying shares in uranium royalty and streaming companies that provide financing to miners in exchange for a percentage of future production
• Investing in physically backed uranium funds that hold uranium as an underlying asset
• Gaining indirect exposure through nuclear utility or nuclear technology companies

Investors should conduct thorough due diligence and consider risk tolerance before making investment decisions. While the long-term fundamentals for uranium appear strong, the market can be volatile and subject to geopolitical risks.

The uranium market is at an inflection point, with growing demand, tightening supply, and geopolitical factors converging to create a compelling investment opportunity. The ban on Russian uranium imports forces US utilities to reassess their fuel procurement strategies, while government funding for domestic enrichment signals long-term policy support for the industry.

At the same time, global demand for nuclear energy is on the rise, driven by the need for reliable, carbon-free baseload power. The emergence of small modular reactors and nuclear-powered data centers presents additional growth opportunities for uranium producers. While the uranium market faces challenges, including a shortage of skilled labor and the need to restart idled mines, the overall outlook remains positive. With inventories declining and the market shifting from surplus to deficit, uranium prices are poised to move higher in the coming years, benefitting well-positioned miners and investors.

Energy Fuels

Energy Fuels continues demonstrating strong financial performance and strategic progress in diversifying its business into complementary critical minerals sectors. The company reported sustained profitability in Q1-2024, primarily driven by its uranium segment. Key highlights include:

Uranium Business:

• Profitable uranium sales into long-term utility contracts
• Two opportunistic spot sales averaging nearly $103/lb U3O8, enabled by significant low-cost inventories
• High gross margins of approximately 56%, supported by low-cost alternate feed material and historic production
• Renewal of a multi-year alternate feed agreement, providing a long-term, low-cost U3O8 source
• Conventional mine ramp-up in Arizona and Utah is progressing on budget and schedule

Rare Earth Elements (REE) Progress:

• Completed modifications to the White Mesa Mill's SX circuit, adding up to 1,000 tonnes of NdPr separation capacity
• White Mesa Mill now has one of the largest rare earth separation circuits outside of China
• Plans to process stockpiled monazite and produce 25-35 tonnes of NdPr oxide and 10-20 tonnes of 'heavy' mixed rare earth concentrate in Q2
• Calibrating mill and mine schedules to accommodate both uranium and REE production without diminishing capacity

Securing Low-Cost Monazite Supply:

• Acquired the Bahia HMS Project in Brazil, advancing toward production
• Announced an MOU to acquire a 49% interest in the Donald Mineral Sand Project in Australia
• Proposed acquisition of Base Resources, owner of the world-class Toliara Project in Madagascar
• Potential to secure up to 50,000 tpa of monazite, containing an estimated 5,000 tpa of NdPr oxide, 200 tpa of Dy oxide, and 70 tpa of Tb oxide

Strategic Benefits:

• Access to Base Resources' proven leadership and heavy mineral sands operations team
• Diversification into the heavy mineral sands (HMS) market, independent of uranium and REE markets
• White Mesa Mill Preliminary Feasibility Study (PFS) demonstrates expected low capital and operating costs, among the lowest globally
• Advancing discussions with commercial customers and the U.S. government on sales and financial support

Energy Fuels is building a diversified, U.S.-based critical minerals company centered on its core uranium processing capabilities. The company aims to create a profitable, globally competitive business that can withstand the cycles associated with critical minerals markets while offering customers a reliable, low-cost domestic alternative.

UR-Energy

Low-Cost Operating Uranium Mining Company

Ur-Energy owns and operates the Lost Creek in-situ recovery uranium facility in south-central Wyoming, producing ~2.8 million pounds of U3O8. In 2021, Lost Creek received an amendment to its license, allowing expansion of mining activities within the existing Lost Creek Project and the adjacent LC East Project. The license now allows annual plant production of up to 2.2 million pounds U3O8, which includes wellfield production of up to 1.2 million pounds U3O8 and toll processing of up to one million pounds U3O8. Additional approvals for this expansion are expected in 2023. Our second uranium in‑situ recovery facility, Shirley Basin Project, has received all major authorizations and is construction-ready.

Ur-Energy engages in the identification, acquisition, exploration, development, and operation of uranium projects. Shares of Ur-Energy trade on the NYSE American under the symbol “URG” and on the Toronto Stock Exchange under the symbol “URE." Ur-Energy’s corporate office is in Littleton, Colorado; its registered office is in Ottawa, Ontario. Our newest uranium in situ project, Shirley Basin, is a part of our acquisition of Pathfinder Mines Corporation in 2013. We also acquired the project's historic geologic and engineering data, which has nearly 3,200 historic drill holes.

An Initial Assessment Technical Report Summary on Shirley Basin ISR Uranium Project, Carbon County Wyoming (the “Shirley Basin Report,” as amended, March 11, 2024) has recently been filed, which confirms the project’s mineral resource estimate of 8.8 million pounds eU3O8 in the Measured and Indicated categories, of which approximately 6.4 million pounds are expected to be recovered. Due to the very high-density level in drilling at the project, all resources within the three proposed mine units are classified as Measured or Indicated. There are no resources in the Inferred category. 

All major permits for the Shirley Basin Project, including the BLM Plan of Operations, Land Quality Division Permit to Mine and associated aquifer exemption, and Uranium Recovery Program License, have been received. Additional minor projects are ongoing to ensure the project is construction-ready. Write a summary for investors

Ur-Energy: A Low-Cost, U.S.-Based Uranium Producer Positioned for Growth

Ur-Energy is a uranium mining company that owns and operates the Lost Creek in-situ recovery (ISR) facility in Wyoming. To date, the facility has produced approximately 2.8 million pounds of U3O8. The company is well-positioned to capitalize on the growing demand for domestically sourced uranium, with a focus on low-cost production and expansion of its existing assets.

Key Highlights:

1. Lost Creek Expansion: In 2021, Ur-Energy received a license amendment allowing for the expansion of mining activities at the Lost Creek Project and the adjacent LC East Project. The amended license permits annual plant production of up to 2.2 million pounds U3O8, including wellfield production of up to 1.2 million pounds and toll processing of up to 1 million pounds. Additional approvals for this expansion are expected in 2023.
2. Shirley Basin Project: Ur-Energy's second ISR facility, the Shirley Basin Project, has received all major authorizations and is construction-ready. The project has a confirmed mineral resource estimate of 8.8 million pounds eU3O8 in the Measured and Indicated categories, of which approximately 6.4 million pounds are expected to be recovered. The high level of drilling density at the project has resulted in all resources within the three proposed mine units being classified as Measured or Indicated, with no resources in the Inferred category.
3. Experienced Management: Ur-Energy's management team has extensive experience in the uranium mining industry, with a proven track record of developing and operating successful ISR projects.
4. Strong Permitting Position: The company has secured all major permits for the Shirley Basin Project, including the BLM Plan of Operations, Land Quality Division Permit to Mine and associated aquifer exemption, and Uranium Recovery Program License. This strong permitting position enables Ur-Energy to quickly advance the project to production once market conditions are favorable.
5. Domestic Uranium Supply: As a U.S.-based producer, Ur-Energy is well-positioned to benefit from the increasing focus on domestic uranium supply, driven by concerns over energy security and the need to reduce dependence on foreign sources.

Ur-Energy presents a compelling investment opportunity for those seeking exposure to the uranium sector, particularly given the company's low-cost production, expansion potential, and strong position in the U.S. market. With the Lost Creek expansion expected to increase production capacity and the Shirley Basin Project construction ready, Ur-Energy is poised for growth as the demand for domestic uranium increases.

Investors should consider Ur-Energy a key player in the U.S. uranium mining industry. The company offers the potential for significant upside as it executes its growth strategy and benefits from improving uranium market fundamentals.