Good news for the uranium sector came this week with an announcement by the French government that the country will delay by 10 years the shutdown of a significant part of its nuclear-power industry. The stay of execution follows President Macron's decision to make France carbon-neutral by 2050. France had previously proposed cutting the contribution of nuclear power to 50% within six years by closing 14 reactors. The extended deadline to 2035 means that fewer than four reactors will close by 2028.
As noted in this week's HindeSight blog, the uranium sector is also awaiting a decision from President Trump as to whether the US will impose import quotas on the metal. This follows a request last year from two US miners that imports of the nuclear fuel be limited (with a mooted 25% quota for domestic production). The US Department of Commerce made a recommendation to the administration in mid-April but details have not been released. The president has 90 days to respond to the report from the day it was submitted.
In 2017, US nuclear reactors, the primary buyers of the country's uranium, took delivery of 43 Mlb U3O8 equivalent, according to the US Energy Information Administration. Of this US uranium consumption, only 7% came from domestic sources, with over half coming from Australia and Canada.
A report by S&P Global Market Intelligence notes that in 2018 the US produced only 2% (2.55 Mlb) of the forecast world U3O8 production. Kazakhstan was expected to have a 43% share of last year's mined output, Canada 13% and Australia an 11% share.
Uranium producers in the US will appreciate the protection provided by any supply quotas as the metal's price is highly unpredictable. Even more than most major metals, uranium has suffered a volatile past 15 years.
Seven years of oversupply since Japan's Fukushima nuclear disaster in March 2011 finally resulted in production cuts from the world's largest uranium miners. In late 2017, Kazakhstan announced it would cut production by 20% over three years. This output reduction was further exacerbated in 2018 when Cameco announced it would indefinitely close its McArthur mine and Key Lake mill in the Athabasca Basin of Saskatchewan.
The price of U3O8 had been relatively stable at around US$10/lb until 2004, then soared 14 fold in just three years to reach over US$140/lb in May 2007, before a sharp decline during the global recession to US$40/lb early in 2010. Like other metals, uranium then recovered, reaching US$70/lb in late 2011 before sharing in the mining industry's near five-year decline — which was amplified by the nuclear-demand implications of the Fukushima disaster.
Uranium touched a recent low of US$18/lb in November 2016, before stabilising during 2017 and then rising US$7/lb in 2018 to reach US$29/lb in January 2019. Unfortunately, the price of uranium has declined this year, falling almost 13% and is now threatening US$25/lb (data from Trading Economics, based on contract for difference financial instruments that track the uranium benchmark).
Uranium was the subject of much debate during a panel discussion on the most attractive metals at the recent Mines and Money (M&M) Asia conference in Hong Kong. In this panel, Jayant Bhandari, an analyst with Anarcho Capital, was bullish of almost all metals in the longer term, noting that consumption had doubled over the past 25 years, and was expected to double again within 20 years. He warned, however, that the industry had a bad track record on over-production.
Warren Gilman, the CEO of CEF Holdings, accepted that all metals would increase in the medium and long-term but the only metal he thought likely to increase in price over the next 12 months was uranium. Gold, he said should be benefitting from stagnating interest rates and central-bank buying but it had "done nothing". Accordingly, he is now "confused" about the precious metal, and it no-longer excites him.
Another advocate of uranium was Andrew Ferguson, the CEO of APAC Resources. Helen Lau, an analyst with Argonaut Ltd, agreed about the prospects for uranium, saying the metal would start benefitting from rising demand, especially in China.
At the end of last year, Stephen Roman, CEO of Global Atomic, said "I believe uranium prices will start to improve due to the belt tightening by Kazatomprom and Cameco". He added that the industry had "hit the lows and now the rebound is starting", explaining that the "Chinese reactor builds are in full swing, and reactor development around the world is increasing as we need base-load, carbon-free electricity".
The CEO of Plateau Energy Metals, Alex Holmes, agreed, saying "the growing reliance on nuclear energy to power cities, submarines and fuel space travel will likely contribute to enhanced demand into the next decade". Mr Holmes did, note, however, that "we have seen (in 2018) a rapid rise in the uranium spot price, and we may see it soften first before it continues to strengthen".