Who Will be the Uranium Winners as Energy Prices Spook Markets?

The uranium space has experienced a tumultuous past year, with it seeing a supply shortage due to geo-political unrest, a global energy crisis and the adoption of nuclear power as an acknowledged form of green energy generation to name but a few. The uranium sector is positioned for the emergence of new uranium operations and companies, which then begs the question – Who Will be the Uranium Winners?

We gathered the insight of three uranium CEOs to answer the question and get a better understanding of the uranium space. The panel consists of Stephen Keith the CEO of Labrador Uranium Inc., Daniel Major the CEO of GoviEx Uranium Inc. and Phil Williams the President and CEO of Consolidated Uranium Inc.

Labrador Uranium Inc. is a junior exploration and development company focused on the advancement of its projects located in the region of Labrador, Canada. The company’s asset portfolio consists of its CMB project, Moran Lake deposit and Mustang Lake project.

GoviEx Uranium Inc. is a Canadian uranium development company focused on its projects located in Africa, namely the Madaouela project, located in Niger, the Mutanga project, located in Zambia and the Falea project, located in Mali.

Consolidated Uranium Inc. is a future uranium producer with assets located in Australia, Canada, Argentina, and the USA. The company’s asset portfolio includes various past-producing mines which may be easily restarted and brought to production.

WNA and the Global uranium sector

The World Nuclear Symposium was held in London between 6 and 8 September 2022. The symposium serves as not only an opportunity for players in the nuclear sector to rub shoulders but also as an indicator of overall sector health. The symposium in contrast to previous years had an immediateness to it and an energy as Dan Major explains. Major tongue-in-cheek refers to the opening address by the Director General of the World Nuclear Association, Sama Bilbao y León, as more of an inspirational “pep-talk” than the more conservative and sanguine tone of such addresses in previous years.  

“I think you'd take it from the Sama Bilbao y Leon presentation when she started the conference off, which sounded more like a cheerleader revving up for a presidential address than the general director of the nuclear industry, which we've got used to in the past as being somewhat conservative and sanguine. This was, 'Our time is now. If you're going to achieve harmony, you've got to quadruple the number of reactors to maintain the one-and-a-half degrees. It's in our hands, our destiny, as ours. We in the industry have to find ways of getting reactors built faster because the world wants them and needs them.'”

The amount of new investors who attended the symposium is an indicator of the health of the uranium sector, with new companies attending the symposium in an attempt to access the sector at a cheaper entry point. Phill Williams explains that various clean energy transition funds have been created, to capitalise on the green taxonomy of the EU.

“What was very interesting, and I’d like to let people get in on it is that the investor interest was very, very strong, particularly from new funds who haven't been in the uranium space. We walked around the street, and I was actually co-marketing with Mark Chalmers, the CEO of Energy Fuels. Of course, we saw regular funds that have been in the uranium space for a long time, but several of the people that we talked to are brand new to the space and particularly newly started clean energy transition funds. I thought this was very interesting. We saw two companies who have just started these funds, they're starting to raise capital, and because nuclear is now part of the European green taxonomy, they can allocate funds into uranium, but they don't know anything about it yet.”

The activity in the market has led to not only the creation of new funds but has also enabled junior developers to more easily enter the market and as such contribute to the growth of the sector. Stephen Keith explains that being at the helm of a newly created uranium company, he has seen the ease of entrance and potential of the sector first-hand.

“I look at it from two points of view: the advantage we've had in the last year when we created the company and went public, and with the news flow coming out of the uranium space that allowed for relatively easy financing. There was an incredible amount of demand, but as an earlier-stage developer, I always try to look at the long-term supply and demand side. I've seen enough mining cycles where people get really excited, and 2-3 years later, whatever that commodity is has died and now your peak has dropped. What I find very exciting for a longer-term developer like ourselves is that this really has long legs. The fundamentals of this are so strong. You can talk about copper, lithium and energy metals, etc, but in the end, we need to supply baseload power.”

The WNA has shown to the investor community that the nuclear sector is set for growth and does not intend to slow down soon. The price of uranium however is slowing the growth of the sector, as the current price of uranium does not enable projects which have a higher operating cost than that of their peers.

The global energy crisis as catalyst

Various geopolitical factors combined with demand increases have led to a global energy crisis. Europe is at the centre of this energy crisis with the results thereof seen throughout the global market and economics. The invasion of Ukraine by Russia did not cause the crisis but did sharply exacerbate it, with European sanctions against Russia and the indefinite closure of Nord Stream 1, the largest pipeline from Russia to Europe adding fuel to the fire. Dan Majors explains that the price of importing uranium sharply rose, due to not only sanctions but the challenge of sourcing transport.

“What has happened is that particularly European utilities have self-sanctioned themselves: they are refusing to buy anything now from TENEX at all. A lot of the US guys have been following that route. For those that want to continue to take Russian material, it now costs you a lot more to ship it. Russian material, historically, on the EUP was a lot cheaper than you could get it from anywhere else, but that equation has changed radically. You're now paying considerable amounts of money to ship material if you can ship material.”

The global energy crisis however has led to the acceleration of uranium operations in more politically stable jurisdictions as well as a more open market, with utility companies in need of uranium from such countries. Williams explains that the challenges in the market have only shown the value of having projects in politically stable jurisdictions such as Canada, the USA and Australia.

“We're in jurisdictions that we know utilities will want to buy material from, and that's Australia, Canada and the US primarily. In particular, in the US, we have near-term production assets in a partner that has the only licensed operable mill in the country, we've got a clear pathway to deliver material, and we think that that's going to be very attractive to utilities.”

Is grade king?

The global energy prices and the need for sourcing uranium from politically stable countries has led to a demand for good-quality uranium operations. The question is then not, where but what to look for. The first factor to consider in any potential uranium operation is grade. The argument has long stood, is high-grade better?

Keith explains that even though the grade is a factor to consider, the truth is that economics is the most important. If a deposit is low-grade, close to the surface and easily processed, its value cannot be compared to a deep, un-accessible super high-grade deposit.

“With the grade, it's an overly simplistic answer that people go to - it is economics. If the size isn't there, the grades are irrelevant. If it's too expensive to get at or can't be permitted, it doesn't matter. If you're in a jurisdiction that scares the hell out of people, a lot of companies my size or that are North American-based or public aren't going to be able to play in that world, so that's not what we're looking at. It's a very fair question, but I think you've got to always turn it to economics.”

Keith explains that starting at the beginning of a project and following a systematic approach will show the potential value of an operation.

“I always start with, can the project be built? Can it be permitted? What are those things that are going to kill an asset completely? In the Canadian context, you look at local communities and indigenous issues. Then you have to look at what are the key economic factors. Infrastructure: Are you having to build billions of dollars of infrastructure to get at your project or not? How easy is it to get it? Then it's about capital costs: for us, where we're looking is relatively low-grade, again, not globally necessarily, but I want things near the surface.”

The systematic approach to evaluating a potential project can be boiled down to three stages. 1. Basic Risk Management, can it be built and what is the risk associated with the area? 2. What is the geology of the deposit like? What is the grade, is it economic? 3. What is required for this operation to work, will it be an open-pit or underground operation?

“You have to start at the basics of risk and risk management, then you move towards geology, then you move to engineering. With each side of it: can I permit it? Can I make money doing it? Is there going to be a long-term market? And you ask that at every stage of the project.”

Who will be the winner?

Companies which will be successful in the uranium space will need to navigate unknown and turbulent waters, however, there are certain factors a successful company will need to have. The first is can the operation be permitted? Major puts it simply, if there is no permit, there is no mine.

“I have no problem with working in Africa. We got our permit in Niger in less than 6 months. All our Zambian projects were permitted as well. If you can't get your permit, you can't mine, no matter what you've got in the ground.”

The ability of a company to navigate the market will add to the likelihood of a company being successful in the sector. Williams explains that if a company can react accordingly to what the market conditions warrant, it will be successful.

“If you have to spend hundreds of millions on CapEx or develop a wellfield, once you start you have to stay in production. We could batch mine our mines, turn them on, turn them off as the market conditions warrant.”

The management team of a company will ensure either victory or defeat. Keith explains that the team on the ground must be local, and must be able to navigate the challenges unique to each jurisdiction.

“Build a local team that knows what they're doing. Bring the right pieces to it, because it's a puzzle, and here we know what the pieces are, so you just go from A to B to C. Very rarely do those things ever kill a project, it's about mitigation. A local group might not like you - why? Okay, how do I answer that question? You can plan, design and structure around it. There are very few fatal flaws like endangered species and protected habitats; hopefully, you've figured that out before you've gone and staked a piece of property. “

To find out more, go to the company websites: Labrador Uranium, GoviEx Uranium, Consolidated Uranium