Although uranium spent much of the third quarter on a downward trend, Aurora Energy Metals (ASX:1AE) non-executive Chairman Peter Lester says the outlook for the market has strengthened considerably.
The uranium price slipped to its lowest point for 2024 of US$78 ($113) a pound in late August, down from over US$85 a pound at the end of June.
However, Kazakhstan-headquartered Kazatomprom, the world’s largest uranium producer, in August cut its 2025 production forecast by around 17%, which is expected to have longer term ramifications.
Lester says this is due to supply chain disruptions and a shortage of sulfuric acid, which is essential for uranium extraction.
“This reduction is likely to intensify the anticipated supply deficit, driving uranium prices higher,” he tells Mining.com.au.
“Moreover, global demand for nuclear energy is on the rise, particularly in the USA, which has committed to tripling its nuclear power capacity by 2050.
“This creates a favourable environment for domestic uranium producers like Aurora.”
Sprott CEO John Ciampaglia said in mid-September that Kazatomprom revising its production forecast lower was another catalyst that would kick start the sector.
“Kazatomprom is such an important producer in the world. 40% of global production comes from the country,” he said in a Bloor Street Capital video interview.
At the same time, China is ramping up its nuclear reactor construction to a completion of one per month, Andrew Vigar, executive Chairman of Terra Uranium (ASX:T92), says.
“They are building the same design at each site, with construction time now down to five years and continuing to drop,” he tells this news service.
“By 2030, China will overtake the US as the world’s largest fleet, unless the US starts more new constructions, which they are promising to do.”
According to the World Nuclear Association, there are currently 439 operable reactors (396 GW), 64 units are under construction in 15 countries (85 GW) and another 344 reactors (365 GW) are proposed.
The Australian Government says in its Resources and Energy Quarterly September 2024 that demand for unenriched uranium oxide concentrate (U3O8) reactors is forecast to be 93 kilotonnes (kt) this year (excluding inventory build), before falling slightly to 91kt in 2025, then rebounding to 97kt in 2026.
“The variation reflects new reactors coming online. More uranium is needed for a reactor’s first fuelling than for subsequent operation,” the report says.
New nuclear entrant countries emerging
Over 20 new entrant countries – such as Ghana, Poland and the Philippines – are at various stages of developing policies to enable construction of their first nuclear plants.
The World Nuclear Association said in its annual World Nuclear Performance Report released in August that nuclear electricity generation rose to 2,602 terawatt hours (TWh) in 2023, up from 2,544 TWh in 2022, providing 9% of the world’s electricity – second only to hydropower among clean energy sources.
“All these new reactors need fuel. Uranium mines are slow and difficult to build. A big shortfall is looming,” Vigar says.
“And this is not taking into account small modular reactors, particularly as replacement for the boilers in current coal fired power plants. When these happen, which is soon, this will double demand at least, and all the major economies have pledged to triple nuclear power capacity by 2050, under COP28.”
Vigar says the uranium price needs to be well above US$100 per pound – in the range of US$120 to US$130 for a sustained period – to incentivise new production.
Since bottoming in August, the uranium price has started heading back up, advancing over 5% to around US$82 by the end of September.
The Australian Government sees price pressure persisting until 2026 and anticipates it will reach US$90 a pound by the end of the same year.
While higher prices will incentivise new production, it is not expected to be sufficient to meet the anticipated shortfall.
“With a primary market shortfall expected to persist, prices are forecast to remain high and continue rising until 2026, as inventories and existing mine capacity come under pressure,” the Australian Government says.
Mergers and acquisition activity is also only just starting, according to Vigar.
“Uranium is a very small market with very few players,” he notes.
Paladin Energy (ASX:PDN) spent the quarter working to advance its planned takeover of Canada’s Fission Uranium (TSX:FCU), but in mid-September hit a speed bump.
After receiving approval from Canada’s competition watchdog and Fission receiving shareholder approval, CGN Mining Company – a subsidiary of China General Nuclear Power, which holds a disclosed interest of 11.26% in Fission, moved to block the takeover.
Just last week, Uranium Energy Corp (NYSE:UEC) revealed it was acquiring Rio Tinto’s (ASX:RIO) fully licensed Sweetwater plant and portfolio of uranium mining projects in Wyoming, which collectively have historic resources of 175 million pounds, for US$175 million.
The motivation for the acquisition was to unlock the development potential of Uranium Energy’s portfolio of 12 projects in the Great Divide Basin, creating a third US hub-and-spoke production platform within the company’s pure-play uranium business.
Microsoft on board with nuclear
Meanwhile, software giant Microsoft has inked a deal with clean energy provider Constellation Energy (NASDAQ:CEG) to launch the Crane Clean Energy Center (CCEC) and restart a unit of the Three Mile Island nuclear plant in Pennsylvania.
Constellation CEO Joe Dominguez says data centres require an abundance of energy that is carbon-free and reliable every hour of every day.
“Nuclear plants are the only energy sources that can consistently deliver on that promise,” he says.
At the same time, lenders are becoming more vocal about their support for nuclear power.
According to the World Nuclear Association, 14 major global banks and financial institutions have expressed support for a tripling of nuclear energy capacity by 2050.
The association says major financial institutions now recognise the key role that nuclear energy must play in the global net zero energy transition and that improving access to financing can help unlock nuclear energy’s potential.
The Australian Liberal Party is also pushing for a reversal of the ban on nuclear energy production in the country and proposes the construction of seven nuclear power plants that would start coming online in 2035 if the opposition takes power in the 2025 election.
Write to Angela East at Mining.com.au
Images: Mining.com.au, Unsplash, US Department of Energy
