Uranium – Powering the future

21 June 2024 12:05

In a world increasingly hungry for energy, uranium is emerging as a crucial player according to Canaccord Genuity analysts. With the push for electrification and decarbonisation, the demand for reliable power sources is higher than ever.

However, recent global events have highlighted the fragility of the uranium supply chain. Sanctions on Russia, production cuts by Kazatomprom, and instability in Niger are all creating challenges for uranium supply.

Why Uranium?

Uranium is vital for nuclear energy, which is gaining recognition for its positive contributions to decarbonisation, energy security, and the provision of cost-effective power. Unlike other renewable sources, nuclear power can provide consistent, reliable energy, making it an essential part of the energy mix as data centres, AI usage, and electric vehicles (EVs) create new grid challenges.


Figure 1: Uranium spot price. Source: UxC

Market Trends

Despite a slight drop in the U3O8 spot price year-to-date, the more crucial contract price has increased by 13%. This trend reflects growing recognition of nuclear energy’s benefits and a robust demand outlook. Even though contract volumes have been down so far in 2024, slowing the price growth, Canaccord analysts expect it to pick up in the back half of the year.


Figure 2: Long-term contract volumes and term price. Source: UxC

Given the current supply deficit of ~30Mlb, the market is starting to see the first wave of mine restarts after a decade of under-investment. While secondary supplies are available, and the current spot price of US$86 is likely sufficient to incentivise the required level of production, uranium projects are not always easy to sanction due to regulatory hurdles, increasing the risk of price spikes.

The recent sanction on Russian uranium imports has only continued the supply squeeze, with the US looking elsewhere for the bulk of its uranium supply.


Figure 3: U3O8 supply and demand. Source: World Nuclear Association

Rising Uranium Demand

Recent deals, such as Amazon Web Services’ partnership with nuclear utility Talen, underscore the growing interest in nuclear power. As energy consumption from data centres and AI rises, similar partnerships are likely to increase, driving further demand for uranium.

Not only has the AI boom created a sudden need for more energy, the United States, along with 20 other countries, have announced ambitious plans to triple their nuclear power output by 2050.


Figure 4: US data centres power capacity requirements (GW). Source: McKinsey

A Market on the Move

The uranium market has seen rapid changes, with a ~50% increase in spot prices to US$86/lb. Geopolitical concerns, production challenges, and rising demand are setting the stage for a sustained bull market. The market needs new mine developments to address the current supply deficit and meet future demand, which is expected to grow by 3.2% annually through 2035.


Figure 5: Electricity demand growth is expected to grow by 3-4% per annum. Source: McKinsey

Uranium deposits in demand

Uranium’s role in the global energy landscape is becoming more critical. With the combined pressures of rising demand, supply chain challenges, and geopolitical shifts, the uranium market is poised for significant growth. This provides small cap companies sitting on large uranium deposits with a huge growth opportunity.

Thunderbird Resources (ASX:THB)

Thunderbird Resources recently announced a significant $4.1 million capital raising to begin drilling and exploration programs across uranium assets in Canada, particularly their Hidden Bay project. They also raised a further $1.075mthrough the sale of Firetail shares, giving the company plenty of capital to enter the drilling phase.


Figure 6: Thunderbird’s Athabasca Basin Project location plan.

The Hidden Bay Uranium Project, a 2,400m drill program, is set to begin in August 2024, with preparatory fieldwork already underway. Considering the uranium price of US$86/lb and its strong long-term outlook, Thunderbird is well-positioned to enhance shareholder value through this focused exploration effort.

THB’s Australian Security Exchange-listed share price is currently trading at $0.029 (12:00 pm UTC+ 8 hours).

Power Metal Resources (AIM:POW)

Power Metal Resources recently announced a strategic financing deal, with plans for a uranium-focused joint venture as the company look to take advantage of uranium’s bullish outlook.

POW signed a non-binding term sheet with ACAM LP, a natural resource-focused investment partnership. This initiated an eight-week exclusivity period to form a uranium-focused joint venture. The investment will fund significant drilling and exploration programs across Power Metal’s uranium licences.

Last year Power Metals increased their wholly owned uranium business, collectively referred to as its uranium portfolio, covering a combined 1,012km2 across 17 properties in the Athabasca Basin in Canada. The company is well positioned to make use of these uranium assets with the recent funding and proposed joint venture.

Sean Wade, CEO of Power Metal, expressed confidence in the strategic move, stating, “We announced on March 25, 2024, that we were looking at various options to maximise value from our uranium portfolio. Whilst there can be no guarantee that the Joint Venture will complete, we are confident that we will achieve a successful outcome and will update shareholders once the legally binding documentation is finalised.”

POW’s London Stock Exchange-listed share price is currently trading at 18.42 GBX (12:00pm UTC+ 8 hours).

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