Fascinating action for the U stocks today. I've been reading more and more lately about the U market. It really is quite fascinating, such an opaque market!
Everything I am reading points to the same conclusion - IMO we are about to enter a pretty major U bull market.
It's a classic case of the commodity cycle. Years of the U market being in the doldrums, low prices which de-incentivises exploration and new mine supply, let alone existing mines in operation, the majority of which have been mothballed for many years. This severe lack of a decade plus of no exploration and no capital investment combined with the "sudden" increase in U demand due to the global drive to decarbonise energy generation has created a perfect storm of events. U stockpiles are nearly run down and now mines are coming out of care & maintenance, but its costing quite a bit to turn them back on. Even then, it's not going to be enough supply - the world needs new mines.
So what will it take price wise to crank up exploration and new mines? Very interesting question because the U market pricing is not so transparent. We've had the speculators like Sprott clearly influencing the market with their buying. But now it's going to be pure market demand / supply fundamentals. You've got the worldwide reactor build gaining pace from the likes of France, Poland, UK, China and India... plus what has been posted about Japan going aggressive again into Nuclear. And Germany and other countries reneging on mothballing nuclear plants. Plus the new SMR technology which is really changing the markets appetite for low capex, reliable electricity generation.
Currently the U term contract pricing, which reflects the vast majority of purchasing by actual uranium consumers (i.e. utilities), continues to trend upwards and currently sits at over $51.50/lb – up from $34.25/lb in August, 2021.
And here is an interesting quote I picked up from one source:
"I’m going to defer to Tim Gitzel, CEO of Cameco, the western world’s most significant supplier of uranium, who said on the most recent Cameco earnings call that $95/lb uranium would be needed to incentivize new production.$95/lb is more than double the current spot and long-term price. It’s a figure we’ve not seen since 2007. As the industry’s senior and most respected producer, Cameco is quite rightly conservative when it comes to making statements and giving forecasts. If their calculations show that another 100% price increase is required, then there is a lot of upside still to come for our sector."
Which is all well and good for the likes of DEV... if we were so lucky to discover another super high grade U lense of ~28m lbs or more... well @ $95/lb is a not too shabby $2.6b in ground value.
Perhaps Paradice have entered DEV at the most opportune time.
GLTA
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