Uranium's Market Disconnect Creates Value Opportunities

• A significant disconnect exists between robust uranium fundamentals and equity valuations, creating a buying opportunity for investors who understand the long-term dynamics
• The uranium market has been undersupplied since 2018, with production meeting only 80% of global demand, creating a structural deficit
• Technical difficulties, mine depletion, and aging infrastructure at major producers highlight the challenges of bringing new supply online
• With global nuclear capacity projected to double by 2040, requiring 300 million pounds of annual production, the supply gap will widen without significant investment
• Western countries are prioritizing energy independence and domestic uranium production, reducing reliance on Russian conversion and enrichment services

Market Dynamics & Price Discrepancies

The uranium market presents a significant disconnect between fundamentals and current price dynamics, creating potential opportunities for informed investors. Term prices, representing the majority of uranium transactions between producers and utilities, have held steady at $80 per pound while the spot price has retreated to $65. As Colin Healey, from Premier American Uranium explains:

"I think 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, while concerning to short-term investors, creates an environment ripe for 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.

Healey emphasizes that investors should focus more on term prices rather than spot market fluctuations:

"Term price has been up over 20% in every year in the last four years and I think that's what uranium investors should look when they're looking at making uranium investments."

This perspective provides a longer-term view of market dynamics, beyond the daily noise of spot price movements.

The recent price decline from $107 to around $65 over the past year represents a classic correction pattern in commodity markets, particularly uranium, which has historically shown significant volatility. However, industry insiders view this correction as temporary given the strong underlying fundamentals.

Panel with Colin Healey, CEO of Premier American Uranium & Troy Boisjoli, CEO of ATHA Energy

Investor Sentiment & Market Behavior

The uranium sector has witnessed significant retail investor participation driving equity valuations, creating a market psychology that can sometimes prioritize short-term price movements over long-term fundamentals. Troy Boisjoli, CEO of Atha Energy Corp, acknowledges this reality:

"From an equities market perspective, it [spot price] is not the only thing that matters. But it might matter more than all other things kind of put together."

This sentiment-driven market behavior creates periodic disconnects between company achievements and share price performance. Companies delivering solid operational results can see muted market reactions during periods of spot price weakness, frustrating management teams and long-term investors alike.

The sector has also suffered from what some describe as "catalyst fatigue," where various promised catalysts for price appreciation fail to materialize within expected timeframes, eroding investor confidence. Unrealistic price targets and timelines promoted by some market commentators have contributed to this challenge.

Healey notes this dynamic:

"There's momentum to that, right? So you do get situations where equities get oversold and there's an opportunity for people who believe in the fundamentals to get in much, much cheaper at times like this."

This pattern of volatility creates both challenges and opportunities for different types of investors.

For long-term investors, this sentiment-driven volatility presents buying opportunities. The market's focus on spot prices rather than term contracts and fundamental supply-demand imbalances allows for accumulation of shares in quality companies at discounted valuations during periodic corrections.

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. 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. As Healey notes, "I always say 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.

Boisjoli explains the correlation between contracting cycles and uranium prices:

"When you look at uranium across cycles...when you see periods of high contracting going over replacement rate contracting...for example think about 2006, 2007, 2008 - the run up into a big contracting cycle - spot price of uranium absolutely shot up, took off as a function, primarily of that contracting cycle."

Catalysts & Market Confidence

The uranium sector faces challenges in maintaining investor confidence during periods of price volatility, particularly when operational achievements don't immediately translate to share price appreciation. Colin Healey describes this frustration:

"Our Cebelleta project in New Mexico in June, we delivered way ahead of schedule 23.5 million pound resource, 80% in the indicated category. Those are big accomplishments that aren't easy to make happen...and it's been super frustrating to see those kind of not necessarily move the stocks."

This disconnect between operational progress and market valuation can be disheartening for companies delivering on their promises. The uranium market has also suffered from exaggerated claims and unrealistic price predictions that failed to materialize within promised timeframes, creating a "boy who cried wolf" scenario that undermines credibility.

Troy Boisjoli notes that despite temporary market disinterest, the fundamental case remains compelling:

"Everyone knows the demand side, the structural deficit, et cetera...And it's like, well, when is it gonna come to fruition? But it's important, like that is a very important part of the story, and that's why Colin and I are sitting here, is that that is a real structural deficit in this market."

The real catalysts that matter in this market relate to supply constraints, contracting activity, and the increasing recognition that future demand cannot be met by currently announced projects. As more utilities return to replacement-rate contracting, price pressure will naturally build, regardless of short-term market sentiment.

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
• Cameco has faced flooding issues at key operations
• Russian mines recently reported flooding problems

These operational difficulties highlight the complex nature of uranium mining and processing. Troy Boisjoli, with his background at Cameco, understands these challenges intimately:

"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."

These production challenges represent a key risk to future supply that market participants may not fully appreciate. Many investment models assume smooth execution of announced mining projects, but history demonstrates that delays, cost overruns, and technical difficulties are commonplace.

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 explains:

"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."

The industry will require substantial new production to replace these depleting assets, let alone meet growing demand. The current price environment, while improving, remains below the incentive levels needed to rapidly advance many new projects, creating a potential supply cliff in the coming decades.

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. 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.

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. As Healey notes:

"Premier's U.S. focused and we're getting incredible kind of support from new initiatives from the White House. The NRC chairman says that he's going to approve new reactors in one year. They want to streamline the process for producing minerals."

These geopolitical shifts favor companies with assets in politically stable jurisdictions like the United States and Canada. The bipartisan support for nuclear energy in the US represents a significant policy shift that creates a more favorable environment for domestic uranium production after decades of decline.

Some market participants have raised concerns about potential nuclear disarmament agreements leading to a new "Megatons to Megawatts" program that could flood the market with weapons-grade material converted to reactor fuel. However, industry experts consider this scenario unlikely in the current geopolitical climate. As Boisjoli states, "I think we're long ways from that. And if it does come about, how many, there's a lot of moving parts there right now. And I'm not concerned about it."

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. 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."

Meeting this production target 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.

Unlike previous uranium cycles where Kazakhstan rapidly expanded ISR production to meet growing demand, no similar large-scale, low-cost production center appears poised to fill the upcoming gap. Boisjoli explains this historical context:

"You think back to the last cycle...What did we have in that period of time?...We had this country called Kazakhstan...that was going from around 8 million pounds per annum just building ISR fields like crazy wrapping up into the 70 million pounds."

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. "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," warns Boisjoli.

A key question facing utilities is whether to return to inventory building rather than just-in-time purchasing. While economically efficient during periods of ample supply, just-in-time strategies create vulnerability during supply constraints. Healey notes this challenge: "It is difficult in a market where utilities believe that supply is gonna be there for them to go out and really think about strategic inventory building at prices that are high."

Premier American Uranium: Focused on US Energy Independence

Premier American Uranium represents a focused play on the growing US domestic uranium market. With strong political support for nuclear energy and increased emphasis on energy independence, the company is positioned to benefit from the changing regulatory landscape.

The company's flagship Cebolleta project in New Mexico recently delivered an impressive 23.5 million pound resource, with 80% in the indicated category. This achievement, completed ahead of schedule, demonstrates the management team's execution capabilities and the project's potential.

Looking ahead to 2025, Healey outlines key milestones:

"We're going to have a resource update and a PEA out. We're targeting, we're saying early summer, we're going to do everything we can to make sure we hit that timeline."

This preliminary economic assessment will provide investors with greater clarity on the project's economic potential and development timeline.

Additionally, the company's Cyclone ISR project in Wyoming is permitted for drilling beginning in July, providing another potential catalyst. ISR (in-situ recovery) mining generally offers lower capital costs and faster development timelines than conventional mining methods, potentially allowing for accelerated production.

ATHA Energy: Scale & Growth Potential

ATHA Energy Corp represents one of North America's largest uranium exploration companies, with its flagship Angulak project demonstrating significant scale. Troy Boisjoli describes the project's potential:

"We have a project, Angilak, 43 million pound resource base wrapped in exploration or resource growth target around that last year with an upper bounds of 98 million pounds."

This resource base, combined with exploration potential, positions ATHA Energy to develop one of North America's most significant uranium deposits. The company's 2025 plans focus on "unlocking the growth potential, increasing the scope, the scale of that project."

Boisjoli's background at Cameco and NexGen Energy provides valuable expertise in advancing large-scale uranium projects through development stages. This experience will be crucial as ATHA Energy works to expand and de-risk its asset portfolio.

The company represents a leveraged play on uranium price appreciation, with its large resource base offering significant upside potential as prices rise to incentivize new production. "There are very few projects in North America that have the scale that we're unpicking at the early days here at Angilak," notes Boisjoli.

The Investment Thesis for Uranium

• Persistent Supply Deficit: The uranium market has operated at a structural deficit since 2018, with production meeting only 80% of demand, a gap that continues to widen
• Inelastic Demand: Nuclear reactor fuel requirements create highly predictable, inelastic demand regardless of price fluctuations
• Production Challenges: Technical difficulties, permitting timelines, and capital constraints limit how quickly new supply can respond to price signals
• Depleting Resources: Major production centers face decline and depletion within the next decade, requiring replacement from new projects
• Secondary Supply Reduction: Historical secondary sources (inventories, HEU, etc.) are diminishing, increasing reliance on primary production
• Geopolitical Shift: Western nations are prioritizing domestic uranium supply chains, creating supportive policy environments
• Contracting Cycle: Early signs of increased utility contracting activity suggest the beginning of a new procurement cycle
• Price Incentive Gap: Current uranium prices remain below the incentive level needed to bring sufficient new production online
• Value Disconnect: Many uranium equities are trading at significant discounts to their fundamental value given future market dynamics

The uranium market presents a compelling investment opportunity characterized by a widening supply-demand gap that will prove difficult to close. Despite short-term price volatility and sentiment-driven equity performance, the fundamental case for higher uranium prices remains intact. The World Nuclear Association's projection of 300 million pounds of annual demand by 2040 – a doubling of current production – will require massive investment in new mines and expansion of existing operations.

As Troy Boisjoli succinctly puts it:

"If everyone delivers on time and at the rate in which they say they're going to produce at, we still don't have enough."

This reality, combined with aging infrastructure at major production centers, diminishing secondary supplies, and the technical challenges of uranium mining, creates a scenario where prices must eventually rise significantly to incentivize adequate supply.

For investors willing to look beyond short-term market noise and focus on the structural supply deficit, the current uranium market offers an attractive entry point into a sector facing years of tight supply conditions. As Colin Healey concludes:

"I just don't see a market prepared to supply twice as much uranium as we are now by 2040. And higher prices will help accelerate that."