Uranium prices have improved suddenly across the international front amid a slight increase in nuclear energy demand across the United States, China, Japan, and scaled back production from large producers across Kazakhstan and Canada.
The prices of Uranium Futures (UXX) improved on the Chicago Mercantile Exchange from its recent low of US$24.00 on 12 March 2020 to the present high of USD 32.85 (Day’s high on 21 April 2020), which underpinned a price appreciation of ~ 36.87 per cent.
World nuclear power generation (Source: DIIS)
United States Uranium Demand and Production
The domestic production of uranium across the United States is on a decline since 2014 when the nation produced 4,891,332 pounds of uranium oxide, and as per the latest preliminary data from the United States Energy Information Administration, the nation only produced 173,875 pounds of uranium oxide in 2019, down by ~ 88.0 per cent against the previous year production.
The domestic production of uranium oxide across the United States also declined on a quarterly basis in 2019 with production slipping from 58,481 pounds in the first quarter of the year to 38,614 pounds at the end of the last quarter, marking a fall of ~ 33.97 per cent.
On the demand side, the share of nuclear energy generation has been consistently increasing across the United States.
Nuclear Share of Electricity Net Generation,1957–2019 (Source: EIA.
Global Consumption Trend
- Nuclear Power to Grow Further- Says DIIS
The Department of Industry, Innovation and Science anticipates that the nuclear power growth would face a significant potential upside, and recently six new reactors were connected across the globe, while construction started on three more. China and Russia both installed two new reactors, including one floating modular prototype plant in Russia; however, in 2019, nine reactors were formally closed due to ageing.
The department suggests that China, India, and Russia would remain the most significant developers of nuclear power, and DIIS anticipates that over the next five years uranium use in nuclear reactors would broadly match the supply side, which is currently slightly higher than the global demand.
World uranium consumption and inventory build (Source: DIIS)
Over the falling domestic productions and higher inputs in energy generations, the United States is relying on the foreign supply, and while the United States is fetching the external supplies, investors are monitoring the Australian uranium industry as Australia supplies 26 per cent of its uranium to the United States
Australian Uranium Industry:
Australia is the third-largest uranium producer in the world, and it exports over 7,000 tonnes of uranium oxide every year. In 2018-2019, the continent exported $734 million worth of uranium oxide, mainly to European nations, the United States, China, Russia, and Japan.
The Australian Department of Industry, Innovation and Science (or DIIS) anticipates that the uranium prices would witness further growth by 2024 as the Australian production underpins a downfall amid the scheduled closure of the Ranger mine, which has entered its final year of operation and its closure is planned for January 2021.
Price forecast (Source: DIIS)
In the March 2019 quarter, the low prices of uranium hindered the investment in the exploration, and as per the data, the uranium exploration marked an inflow of $2.3 million during the last quarter of the year 2019, which was down by over 36 per cent as compared to the previous quarter investment of $3.6 million.
The Production Scenario:
The Ranger uranium mine, which is operated by the Energy Resources of Australia Limited (ASX: ERA), is set for closure at the beginning of the year 2021, which in turn, would reduce the output of uranium and would hamper the domestic supply.
Australian uranium production forecast (Source: DIIS)
However, a recent feasibility study of Honeymoon uranium mine, owned and operated by Boss Resources Limited (ASX:BOE) could prove viable over the near-term. The mine of the Company has been in ‘care and maintenance’ since 2013; but, in the status quo, BOE has announced its intention to re-open it.
As per the pre-feasibility studies report, the mine could produce around 770 tonnes of uranium per year for 12 years, and Boss Resources confirmed that the production at the mine could be fast-tracked into production within a year of a decision to do so.
However, the DIIS assesses that the mine would require USD 50 per pound of uranium prices to be viable, which is further anticipated by the department to reach by 2023 or 2024, providing a firm ground for the mine to reopen during the same period.
- Export Earnings to Tumble
Over the potential loss of supply due to the upcoming closure of the Ranger mine, the export volumes are projected to decline over time, which in turn, is anticipated to further reduce the export earnings ahead gradually over the period of 2019 to 2024. However, the investors should monitor the development of the Yeelirrie mine, which was taken over from BHP by Cameco Group in 2012.
Australian uranium export forecast (Source: DIIS)
The Yeelirrie mine in Western Australia sits upon a massive uranium deposit in Australia, and once operational, the mine has the potential to deliver about 3,850 tonnes of uranium oxide for around fifteen years.
Cameco Australia secured environmental approval from the Commonwealth Department of Environment and Energy and a provisional approval from the Western Australian state government; however, the mine is pending the final approval from the state government.
Over the export shortage of uranium from Australia and higher inputs of uranium in the energy generation, could support the uranium prices in the international market, which in turn, is attracting investors towards uranium stocks, which have uranium exposure.
The uranium plunge till mid-2018 from the beginning of the year 2017 has exerted tremendous pressure on the share prices of uranium players; and many uranium stocks are trading near their all-time low, which in turn, makes them attractive for the bargain hunters.
Apart from the depreciated value, the projections of uranium shortfall and rise in demand are drawing investors’ attention towards uranium players.
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