Uranium Price Pullback Creates Strategic Entry Point

• The uranium market is at an inflection point with spot prices at $64-65/lb (down from $107 highs) while term prices remain steady at $80/lb, creating an investment opportunity due to this disconnect.
• Global uranium demand is projected to double by 2040 to 300 million pounds annually, driven by nuclear energy adoption, data centers, and emerging technologies like SMRs.
• Supply faces significant constraints including aging mines, depleted secondary supplies, and challenges in bringing new production online due to technical difficulties and regulatory hurdles.
• Geopolitical factors have reshaped the market following Russia's invasion of Ukraine, creating a bifurcated market with Western producers and utilities pursuing separate strategies from state-owned entities in China, Kazakhstan, and Russia.
• Uranium companies are positioned to capitalize on market dynamics, though industry consolidation appears increasingly necessary as small production becomes less economically viable.

The global uranium market stands at a critical inflection point in early 2025, presenting a compelling investment opportunity despite recent price volatility. Since reaching highs of $107 per pound in 2024, spot prices have retreated to around $64-65 per pound, while term prices have held steady at $80. This disconnect between short-term pricing and robust long-term fundamentals creates a potential entry point for investors who understand the structural supply-demand dynamics that will shape the uranium market in the coming decades.

As the world increasingly embraces nuclear energy as a reliable, zero-emission power source, uranium demand is projected to double by 2040, requiring approximately 300 million pounds of annual production. Meanwhile, the industry faces significant challenges in bringing new supply online, including lengthy regulatory processes, technical complexities, and substantial capital requirements. These factors, combined with depleting resources at existing mines and diminishing secondary supplies, create a scenario where prices must eventually rise to incentivize adequate production.

Market Dynamics & Price Discrepancies

The uranium market presents a significant disconnect between fundamentals and current price dynamics. As Colin Healey from Premier American Uranium explains in a discussion:

"There is a disconnect in the market, specifically between the unbelievable fundamentals in the uranium sector and the uranium spot price and uranium term price."

This price differential creates an environment conducive to what industry experts call the "carry trade" – where traders contract with utilities for future delivery at the higher term price while purchasing material in the spot market today. The wider this gap becomes, the more attractive this trade becomes, potentially providing a floor for spot prices.

Industry observers note that the recent price decline from $107 to around $64-65 represents a classic correction pattern in commodity markets. Several factors have contributed to this decline, including the winding up of the Kazakh-based ANU Fund, which according to Dustin Garrow forced "a couple million pounds" into the market, creating downward pressure on prices.

It's important for investors to understand the dual nature of the uranium market. As Denison Mines CEO David Cates explains in an interview:

"Most volumes, most of the actual uranium that's bought sold that goes to a customer utility that actually uses it is happening in the long-term market."

The spot market, while receiving more attention from investors and media, represents a relatively small portion of actual uranium transactions but has an outsized impact on market sentiment. Cates notes that the current environment, with term prices exceeding spot prices, is actually historically normal:

"If you go back many years and look at sort of the broad trend of a more healthy uranium environment usually the term price is being quoted at premium."

This premium exists because utilities are seeking security of supply over multiple years, not just immediate delivery.

Supply & Demand Fundamentals

The uranium market has been structurally undersupplied since 2018, operating at approximately 80% of global demand. This persistent deficit has been temporarily masked by secondary supplies and inventory drawdowns following the Fukushima disaster, but these sources are becoming increasingly exhausted. As Healey explains:

"We're perpetually under supplied. And that has a lot to do with the inventory that we built up post-Fukushima. But that doesn't change the fact that slowly we're putting that inventory into places where it's not that liquid or we're consuming it."

Unlike many commodities where demand can be highly elastic based on price, uranium demand shows remarkable consistency. Nuclear plants require uranium fuel regardless of price fluctuations, making demand predictable over long periods. Healey notes,

"Demand for uranium is the most inelastic I've seen in any commodity. Utilities don't purchase more uranium at low prices, don't purchase less at high prices, they just purchase because the most important thing in running a nuclear plant is having supply."

On the contracting side, there are encouraging signs of increased activity. US utility contracting in 2024 reached approximately 30 million pounds, representing a 50% increase from 2023 levels. Even more promising, US utility contracting in early 2025 had already reached 50% of 2024 levels, suggesting accelerating procurement activities as utilities secure future supplies.

Supply Side Risks & Production Challenges

The uranium industry faces significant technical challenges in bringing new production online and maintaining existing operations. Recent examples illustrate these difficulties:

• Paladin Energy experienced operational challenges at its flagship Langer Heinrich mine during restart
• Kazatomprom, the world's largest producer, has struggled to meet production targets
• Russian mines recently reported flooding problems

These operational difficulties highlight the complex nature of uranium mining and processing. As Troy Boisjoli, CEO of ATHA Energy, explains:

"There's a lot of moving parts to building, developing, operating and executing on the uranium mine, especially a large scale operation or conventional uranium operation. And it does take time and it takes people, it takes access to capital."

Even more concerning is the aging infrastructure at key production centers. Cameco confirmed on a recent earnings call that its flagship Cigar Lake mine is scheduled for depletion by 2036. Similar depletion concerns exist across other major uranium districts. As Boisjoli notes,

"You look across the largest production centers in the world. And you have assets that are looking at decline rates from here out to the 2035's. You look at assets that are at the tail end, not at the start of their production history, of their production life... Secondary supplies are drying up. And if I was a utility, I would be doing a very deep dive on the supply side of this market.

The depletion of secondary supplies represents another critical factor. Historically, these secondary sources (including inventories, HEU conversion, and other non-mining supply) accounted for over 20% of market supply. These sources are now diminishing, putting additional pressure on primary production.

The Role of Geopolitics in Uranium Supply

Geopolitical factors have become increasingly important in the uranium supply chain, particularly following Russia's invasion of Ukraine. While Russia's role in raw uranium supply is relatively limited, its dominance in conversion and enrichment services created significant price spikes in these segments following the conflict.

As Healey explains:

"Russia's extremely important in the fuel cycle. And that's something that the US is going out of its way to address that reliance. I've always kind of tried to highlight the fact that the Russian role in uranium in US is much more geared towards the fuel cycle than it is to actual uranium U₃0₈ supply."

Conversion costs skyrocketed from $18 in February 2022 to approximately $95 by mid-2024, illustrating the market's sensitivity to Russian supply disruptions in this segment. Similar price surges occurred in enrichment services.

China continues to pursue an aggressive procurement strategy, having reportedly purchased 40% of 120 million pounds of term volume from Kazakhstan last year. The result is an increasingly bifurcated market where state-owned producers from China, Kazakhstan, and Russia pursue different strategies than Western producers and utilities, potentially leading to two different price environments and supply chains.

The United States has responded by prioritizing energy independence across the nuclear fuel cycle. This includes initiatives to streamline approvals for new nuclear reactors and mineral production. The Russian ban in the U.S. was unanimously passed by the legislature and is unlikely to be overturned, though waivers could be extended beyond their current 2027 expiration.

Future Projections & Strategic Planning

The World Nuclear Association projects uranium demand to reach approximately 300 million pounds annually by 2040, representing a doubling of current production. This growth forecast doesn't include potential demand from small modular reactors (SMRs) or other advanced nuclear technologies, suggesting the actual requirement could be even higher. As Healey explains:

"By 2040, WNA says we're gonna need 300 million pounds of production. That's a doubling. I know it sounds like a long way up, but as Troy alluded to and Cameco on their quarterly conference call last week said Cigar is scheduled to be depleted by 2036."

Beyond traditional utilities, new demand sources are emerging that could significantly impact the market:

• Small Modular Reactors (SMRs): Countries like Singapore, Ghana, and potentially Germany are exploring SMR technology. Even countries that previously rejected nuclear power are reconsidering with SMRs.

• Data Centers and AI: Technology companies operating hyperscale data centers are increasingly looking at nuclear power. According to Garrow, "all the data center guys signed on to the tripling of nuclear declaration" at a recent conference in Houston.

• Industrial Applications: Companies like Dow Chemical are exploring small reactors for industrial use, with plans for  four-pack of 90-megawatt X Energy reactors at their Texas chemical plant.

Meeting projected production targets will require substantial investment in new mines, expansion of existing operations, and accelerated development timelines. Even with all announced projects coming online as scheduled (an unlikely scenario given historical execution challenges), the industry would still face a supply deficit.

• ‍Peninsula Energy is making significant strides toward uranium production, with its flagship Lance Projects in Wyoming representing one of the largest uranium projects in the US. After a five-year hiatus, uranium in-situ recovery operations recommenced at Lance in December 2024, marking a crucial milestone in Peninsula's journey to become a fully independent uranium producer. The company's interim financial report for half-year ended December 2024 highlights some challenges, including a reported loss of US$7.7 million and delays in the planned completion of yellowcake filtration and drying circuits, pushing scheduled production of first dry yellowcake to the June quarter 2025. Despite these challenges, Peninsula maintains a solid financial position with a net working capital balance of $38.4 million.

• Meanwhile in Africa, Deep Yellow positions itself as one of the best-positioned uranium mid-cap companies globally, with two long-life advanced uranium projects in tier-1 mining jurisdictions. The company's flagship Tumas Project in Namibia has achieved a 30-year life of mine with ore reserves of 79.5Mlb and planned annual production of 3.6Mlb. The company has deferred its Final Investment Decision on Tumas until March 2025 due to delayed costings and quotes for equipment and construction, and further project optimisation opportunity identified, but early works on non-process infrastructure are continuing and the company holds ith a strong cash position of A$246M.

Industry Consolidation & Company Positioning

Given the challenges facing smaller producers, industry consolidation appears increasingly necessary. As Uranium expert Dustin Garrow suggests,

"The industry needs to get stronger with larger producers, 5, 6, 7, 8 million pounds a year just to support their requirements."

Despite the stable and growing uranium demand, utility companies demonstrate a surprising lack of urgency regarding uranium procurement. Garrow observed this attitude firsthand at a recent U.S. utility conference, reporting the level of complacency was very high and the lack of market knowledge was particularly concerning, with many utilities focusing more on conversion and enrichment challenges than on securing adequate uranium supplies. Garrow notes that according to the WNA reactor list, current uranium requirements are approximately 175 million pounds annually, remarkably similar to the 173 million pounds required 20 years ago, despite shifts in reactor locations and types.

Dustin Garrow, Uranium Market Expert

The economics of small production no longer seem viable. This consolidation trend is already visible, with companies like Uranium Energy Corp successfully pursuing an M&A strategy. For investors considering uranium exposure, different uranium companies offer varying exposure to market dynamics:

• Producers: Companies with existing production benefit most immediately from rising prices but may have limited growth potential
• Near-term developers: Companies in late-stage development offer a balance of near-term catalysts and production upside
• Explorers: Early-stage companies offer highest theoretical upside but face the longest timeline to benefit from market improvements

The jurisdiction of uranium projects increasingly matters for both development timelines and marketability to utilities. Projects in stable mining jurisdictions with clear regulatory pathways generally deserve premium valuations.

References:

1. Crux Investor (Mar 2025). Uranium's Market Disconnect Creates Value Opportunities
2. Crux Investor (Mar 2025). Why Uranium's Fundamentals Outweigh Recent Price Weakness
3. Crux Investor (Mar 2025). The Uranium Supply Problem: Why Now Is The Time For Strategic Investment