URANIUM | SPECIAL REPORT
Left: Main processing plant at Inkai Photo credit: Cameco
Uranium holdings On average, the annual global demand for uranium is around 150 million pounds. Industry expects nuclear power plants to secure contracts roughly two years ahead of use and the ‘front end’ fuel manufacturing process — enrichment, conversion, fuel fabrication, transport and storage — as well as refuel schedules of up to two years, tends to decouple uranium mine production from fuel supply.
The need for an increase in fuel supplies in the event of
new reactors is apparent years and sometimes decades in advance. In fact, that long term visibility is a major factor in driving market activity that — so far — has had a much more significant effect on the price of uranium than events in Kazakhstan. The major shakeup is the entry into the market of companies dedicated to building stockpiles of uranium, in a gamble that the price will increase in the coming years. There are two main players. UK-based Yellow Cake Plc is a fund set up to offers exposure to the uranium spot price by “buying and holding” physical U3
O8 . The company says it “seeks to generate returns for
shareholders through the appreciation of the value of its holding of U3
O8 and its other uranium related activities
in a rising uranium price environment.” The company has a ten-year Framework Agreement uranium supply with Kazatomprom, but after a buying spree in mid 2021 it already holds 15.83 million pounds of uranium, all of which is held in storage in Canada and France — and so is unaffected by any unrest in Kazakhstan. On 29 October 2021, Yellow Cake completed a $150 million
share placing and “took advantage of very favourable market conditions for uranium” to buy another 2 million pounds of uranium from Curzon Uranium, spending $93 million. In January it decided to hold an additional General Meeting of shareholders, ahead of the scheduled meeting in September 2022, because it said uranium was still undervalued. It wanted to be able to exercise in full in 2022 its annual option to buy $100 million worth of uranium from Kazatomprom (an agreement that runs to 2027) and “to act opportunistically should it identify further opportunities in the market for the purchase of additional uranium”. It also expects to complete this year’s purchase of US$43 million worth of uranium from Kazatomprom as planned by June. Yellow Cake is not the only company that has been driving up the uranium price with a ‘buy to hold’ strategy. It followed major resources investor Sprott Asset Management, which acquired Uranium Participation Corporation in July, and listed the Sprott Physical Uranium Trust (SPUT) in Canada shortly afterwards. SPUT took
ownership of UPC’s existing inventory of 18.1 million pounds of uranium and began a huge uranium purchasing campaign. Reportedly SPUT had $1.3 billion to spend from its investors. Its holding increased to nearly 30 million pounds by the end of September 2021. It added a further 6 million pounds to that total in October. Since then, Kazatomprom has invested in its own physical
uranium fund, ANU Energy OEIC Ltd. It too will hold physical uranium as a long-term investment, with initial investment of $50 million (Kazatomprom 48.5%, National Investment Corporation of the National Bank of Kazakhstan 48.5%, and Genchi Global 3%). The fund could raise up to $500 million.
Will these companies’ gamble pay off? The companies holding physical uranium have driven a major price increase — but they believe the price will rise further as demand increases. Some factors support that belief. A key decision by the
European Commission — which also coincided with the Kazakhstan unrest — will also put upward pressure on uranium prices. After months of debate it decided to include nuclear energy in its ‘sustainable finance taxonomy’ draft proposal, provided the nuclear assets involved had full decommissioning and waste disposal plans. Being included in the taxonomy is seen as fundamental
to enabling investments in sustainable energy across Europe and nuclear has fought hard to be included. It will release investment in nuclear in Europe, and the taxonomy is likely to be influential in allowing nuclear to be viewed as sustainable elsewhere. But Sprott is not relying on new-build — in fact it said in
a blog that SMRs, for example, “are not likely to contribute meaningful amounts of carbon-free power for another decade”. Instead, it lauds, “Less newsworthy technological advances” which is says “are making a critical immediate difference and have been doing so over the last two decades”. It is referring to nuclear power plant life extensions and power uprates. It notes that from the 1970s to the end of 2021, US nuclear power capacity increased by the equivalent of eight new nuclear reactors because of upgrades, and “In terms of uranium demand, thermal upgrades directly impact demand, increasing the annual consumption of nuclear fuel without changing the number of reactors”. It says, “Extensions are just as valuable, though less quantifiable in apples-to-apples terms.” Beyond the short term, these companies believe higher fuel demands are likely to place more pressure on uranium prices than the unrest in Kazakhstan. That is a price pressure the industry will welcome. ■
www.neimagazine.com | February 2022 | 17
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