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Potential uranium supply shock looms following Biden’s Russia ban

5 June 2024 14:46
ASX:THB

On May 13, President Joe Biden enacted the ‘Prohibiting Russian Uranium Imports Act’, barring the importation of Russian enriched uranium into the United States, a trade valued at approximately $1 billion annually.

This measure, in response to Russia’s invasion of Ukraine, is set to take effect 90 days post-signing. Alongside the ban, there’s a provision for $2.7 billion in government aid aimed at rejuvenating the nearly defunct U.S. nuclear fuel industry.

This legislation marks the termination of over three decades of trade ties with Russia.

Despite operating the highest number of nuclear plants globally—94 compared to France’s 56, China’s 56, and Russia’s 36—the U.S. has heavily relied on Russia, sourcing up to 25% of its enriched uranium product (EUP) from them.

Although the ban won’t be fully enforced until 2028, allowing the Department of Energy to issue waivers in cases of supply concerns, its long-term ramifications could be substantial.

Legislative actions intensify supply concerns

This is a pivotal moment for uranium mining companies, especially considering Russia’s status as the world’s second-largest producer of this heavy metal.

With recent legislative measures, alongside diminished supply projections from major producers in Canada and Kazakhstan, apprehensions about a supply crunch have intensified, fuelling optimism in uranium markets.

In 2023, the price of uranium soared, reaching approximately $90 USD per pound—an impressive 60% surge compared to a year prior.

Despite a recent downturn, the price remains significantly elevated. If Russian uranium exports are halted prematurely, it could trigger a significant shortfall in supply, potentially pushing prices even higher.

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Figure 1: The 12 month Uranium (USD/Lbs) price. Source: Trading Economics.

Bullish long-term demand outlook

Whilst the supply shortage is likely to ease once producers ramp up uranium production once again, the long-term demand outlook for uranium remains positive. The market is long removed from the sustained bear market it faced following the Fukushima nuclear disaster.

The United States, along with 20 other countries, has announced ambitious plans to triple their nuclear power output by 2050. This commitment highlights the increasing reliance on sustainable and stable power sources, further boosting the demand for uranium.

One thing remains clear, nuclear energy is the cleanest, most efficient and least dangerous source of energy at scale and will be essential in achieving global Net-Zero targets. The demand for uranium is going nowhere, and this bodes well for both uranium investors and uranium producers alike.

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Figure 2: Uranium Supply and Demand forecasts. Source: ANS

A need to look elsewhere

As the U.S. rebuilds enrichment capabilities, the global uranium market is being reshaped.

Executive Vice President at Uranium Energy Corp (UEC), Scott Melbye, says, “It’s very important that the West develop its resources and nuclear fuel cycle in places like Canada, United States and Australia.”

This has opened up opportunities for smaller cap mining companies to emerge on the uranium scene.

Thunderbird Resources (ASX:THB)

Earlier this week, Thunderbird Resources announced a significant $4.1 million capital raising to begin drilling and exploration programs across uranium assets in Canada, particularly their Hidden Bay project.

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Figure 3: Thunderbird’s Athabasca Basin Project location plan.

The Hidden Bay Uranium Project is a 2,400m drill program strategically located within the Athabasca Basin. Its potential is underscored by its proximity to the historic Rabbit Lake Uranium Mine, which operated for over 41 years and produced more than 203 million pounds of uranium concentrate.

Drilling programs are planned to commence in August 2024 and look set to take advantage of any supply squeeze created by the recent Russian import ban.

THB’s Australian Security Exchange-listed share price is currently trading at $0.033 (2:30 pm UTC+ 8 hours).

Moab Minerals (ASX:MOM)

Moab Minerals is a junior uranium exploration company that recently acquired two significant uranium projects in Tanzania.

Given the recent surge in uranium prices, Moab has seized the opportunity to expand its portfolio at an opportune moment.

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Figure 4: Location of Manyoni and Octavo Uranium Projects.

Situated within Tanzania’s Archaean Shield, these projects are positioned in an area known for hosting world-class uranium deposits.

The Manyoni Project already possesses an impressive historical MRE of 20.5 million pounds of U3O8 at a grade of 147 ppm U3O8, based on data collected from 3,746 drill holes between 2005 and 2009.

Moab is well-positioned to accelerate exploration efforts and enhance operations across the Manyoni and Octavo Projects, an area that the U.S. may now look to for its uranium supply.

MOM’s Australian Security Exchange-listed share price is currently trading at $0.004 (2:30 pm UTC+ 8 hours).

C29 Metals (ASX:C29)

C29 Metals recently finalised a binding share sale and purchase agreement with CA Metals Pty Ltd and Ulytau Resources Ltd. The agreement ensured the acquisition of a 100% interest in the Ulytau Uranium Project, situated within a granted exploration license in Kazakhstan.

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Figure 5: Ulytau Uranium Project Location Map.

The Project boasts a Non-JORC foreign estimate of 9.85 million pounds of uranium at 2,790 ppm, supported by numerous drill intersects exceeding 40 metres and surpassing 6,000 ppm U308 from shallow depths.

Subject to approvals, C29 Metals aims to validate historic data and investigate under-explored areas across the tenement through drilling programs starting in Q3 CY2024.

Given the uranium industry is experiencing unprecedented supply pressure, now is as good a time as ever.

C29’s Australian Security Exchange-listed share price is currently trading at $0.07 (2:30 pm UTC+ 8 hours).

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