Uranium Conference - Sponsored by Sprott
What this covers
Thank you for joining us today for out Virtual Uranium Conference. We want to thank our corporate sponsor Sprott Inc. - The Largest Manager of Uranium Investments in the World (as of Jan 19'24). To learn more check out their website https://sprott.com/
Uranium Insider https://www.uraniuminsider.com/a/41334/KyKECmuX
UxC Publications https://www.uxc.com/
Agenda - All Times ET
00:00:00 Intro James Connor
00:02:50 John Ciampaglia CEO - Sprott Asset Management
00:27:16 Ross McElroy CEO - Fission Uranium
00:56:42 Justin Huhn – Uranium Insider
01:33:08 Phil Williams CEO - Iso Energy
01:50:58 Kirk Schnoebelen Advisor - Urenco
02:05:05 Leigh Curyer CEO - NexGen Energy
02:35:47 Kurtis Hinz CEO – TAM International
02:51:30 Jordan Trimble – Skyharbour Resources
03:12:48 Rick Rule – Rule Investment Media
03:46:49 Jonathan Hinze President – UxC
04:20:52 Dastan Kosherbayev CCO- Kazatomprom
Conclusion
Waiver & Disclaimer If you register for this webinar/conference you agree to the following; This webinar is provided for information purposes only. Presenters will not be providing legal or financial advice to any webinar participants or any person watching a recorded version of the webinar. All webinar participants or any person watching a recorded version of this webinar should obtain independent legal and financial advice. All webinar participants accept and grant permission to Bloor Street Capital Inc. and its representatives in connection with such recording. The information contained in this webinar/conference is current as of January 26, 2024, the date of this webinar/conference, unless otherwise indicated, and is provided for information purposes on. Bloor Street Capital was paid a fee for this conference.
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The 2024 uranium market is entering a fundamentally new phase driven by structural supply deficits and geopolitical factors, where term market contracting and production financing will reshape valuation, making traditional equity valuations significantly lagging the commodity price and creating exceptional value for disciplined investors focused on large-scale, low-cost producers.
- Spot uranium prices have reached $100+ but equities haven't kept pace because feasibility studies used $50-75 pricing and will be rewritten at current prices, creating valuation upside
- Supply is severely constrained with Kazakhprom missing targets, CAMECO facing challenges, and no new production coming online for 5-7 years, creating multi-year deficit
- Term market pricing and long-term contracts with utilities are replacing spot transactions, providing cash flow visibility that makes production financing possible for projects that couldn't finance in previous cycles
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In the mid-2000s utilities were buying upwards of 250 million pounds per year on long-term contracts which collapsed after the 2011 Fukushima event, averaging only 70 million pounds per annum over a 10-year period, and the market has now only recovered to 160 million pounds in contracting suggesting utilities are still under-contracted relative to historical patterns
“in the mid 20000s there were years where the industry was buying upwards of 250 million pounds per year on long-term contracts that obviously collapsed um after 2011 and averaged about 70 million pounds per anom over a 10year period”
Kazakhprom is the largest uranium producer in the world producing approximately 22% of global production, and has recently announced production shortfalls for 2024 and 2025 due to inability to secure sufficient sulfuric acid and slowdown in construction, not due to mine depletion, which represents a massive development for the sector since Kazakhprom's production shortfall means less uranium is entering the global market at a time when supply is already constrained
“Adam prom is the largest producer of uranium in the world and Kazakhstan on 100% basis is unparalleled they produce almost 60 million pounds a year which is about 40% of the total Global uranium production”
The term market for uranium is replacing the spot market as the primary venue for transactions, with term prices now at $68 per pound and showing upward momentum, and this shift is fundamentally important because term contracts provide price visibility and certainty that enables production financing for projects that could not have been financed in the previous spot-market-dominated cycle
“as the price goes up it really helps to validate the thesis it as the price has gone up it also has made the sector more investable in terms of size and liquidity”
Flex provisions in uranium contracts allow buyers to take 20% more or less uranium at time of delivery: in bear markets utilities flex down to buy cheaper on spot market benefiting producers with supply, but in bull markets utilities flex up to maximize contract benefits, squeezing producer inventories and forcing them into spot market as buyers even while being competitors with clients
“they would allow the utility signing a contract with them at the time of delivery to decide to to receive more or less uranium sometimes up to 20% more or less than the contracted amount... if you're in a bare Market you... decide to flex down... if you take as much as you can out of that contract... because it's cheaper than what you can top up in the spot market”
The US House of Representatives passed HR 1042 in December 2023 that implements an instant ban on Russian uranium imports but allows a waiver process through December 31 2027 for importation of Russian enriched uranium, after which the ban becomes permanent, and the bill is currently held up in the Senate by Senator Ted Cruz who is using it as leverage for a separate semiconductor regulatory bill
“a bill passed uh the US House of Representatives sort of second week of December I believe uh you you know unanimously so both uh parties agreed to that that bill HR 1042 basically um implements an instant ban on Russian Imports of enriched uranium but then allows for waiver process”
The first provincial environmental approval for a uranium mining project in Saskatchewan in over 20 years was granted to NextGen Energy's Rook One deposit, and the approval process was the fastest approval ever granted for a uranium project in the province, demonstrating that regulatory barriers to uranium mining have become less significant as public policy has shifted to support nuclear energy
“our provincial uh approval was the first one in over 20 years uh it was the fastest one that uh had ever been approved”
There has been zero new primary uranium production brought online in the past 10 years despite multiple uranium price spikes and favorable market conditions, because building a uranium mine requires 5-7 years of development from discovery or restart, and long-term contracting agreements are necessary before production financing becomes available, meaning any uranium production coming online before 2029-2031 must already be in late-stage development or restart phases
“the incentive price won't result in new production for between five and seven years because it takes that long to build a deposit”
COP 28 commitment by 24 countries to triple nuclear energy by 2050 represents a fundamental policy pivot toward nuclear as essential for decarbonization and energy security, reducing the legacy stigma against uranium investment and aligning uranium with ESG/climate investment themes
“at the UN climate change conference 24 countries backed a declaration calling for the tripling of global nuclear energy capacity by 2050”
US utilities are late relative to European and Asian utilities in securing uranium supply, with Western policy makers focused on near-term election cycles rather than long-term energy security, creating geopolitical vulnerability as China secures long-term supplies using a 25-75 year planning horizon similar to Japan's 1970s post-embargo energy security strategy
“it's almost as if the US policy makers are totally oblivious to this because the Chinese the one thing they do very well they think long term they're thinking 25 50 75 years out whereas we in the west or in North America we tend to think about this week next week next month right we're very shortsighted”
Uranium was the top performing commodity in 2023, up an astonishing 80%, driven by government policy supporting nuclear energy, supply shocks from major producers cutting production, and geopolitical issues including the war in Ukraine, Russian sanctions, a coup in Niger, and shipping disruptions in the Red Sea
“uranium was the top performing commodity in 2023 up an astonishing 80% and this is being driven by government policy Supply shocks and geopolitics”
Enrichment services prices have approximately doubled from $65 per SWU (separative work unit) in March 2022 when Russia invaded Ukraine to $150 per SWU in early 2024, driven by Western buyers moving away from Russian enrichment supplies due to security concerns, and future expansion of enrichment capacity will take until 2025-2027 to come online, creating a multi-year supply constraint for enrichment services
“the expansion that we announc for our us project will start to produce increased quantities of enriched uranium next year in 20125 and that expansion will be complete by 2027”
The uranium spot market is extremely illiquid with typical deal sizes of 100,000-150,000 pounds; taking 500,000 pounds out of the market would require multiple transactions over time and move prices substantially, demonstrating that any large buyer would face significant market impact costs
“most average deals are 100 150,000 pounds... once you start going into the larger volumes uh you know there have been what you'd call maybe uh bulk volume premiums”
Spot uranium price information is collected by UXC through a combination of broker-based transactions, direct negotiations between buyers and sellers, and conversations with market participants, representing the broadest-based market data available since UXC collects information on transactions that are not brokered and may not be known by other market observers
“we believe that the data we collect is the broadest based data we actually always every year consistently publish the biggest volume of transactions that uh anybody publishes”
Uranium transportation has become more challenging with the Suez Canal under attack causing ships to be delayed 7-10 days and forced to reroute around Africa or take alternative routes, and the Panama Canal experiencing water level problems that have reduced capacity to 40-50% and created auctions for priority passage costing $1-3 million per vessel, both of which compress uranium supply timelines and increase logistics costs
“there's nothing that I'm seeing that's going to show that this is going to slow down anytime soon... vessels are delayed seven 10 12 days”
The 20-year bare market in uranium from 2011 to 2021 created structural undersupply in uranium mining expertise and management talent, with only 10-15 capable management teams available at the end of the last bull cycle but 500 uranium companies competing for them, whereas the current market has 81 uranium companies competing for 15-20 management teams, creating a much healthier situation and reducing the probability of a speculative bubble
“uh I think that's healthy in the last cycle if you measure from trough to Peak the number of Junior companies involved D in the Uranian business increased from five I own them all to 500”
Rick Rule argues that uranium markets will not return to the speculative frenzy of the last cycle (2006-2008) because investors were punished severely by overoptimism; the sector collapsed from 500 junior companies to 35, and subsequent cycles of speculation (2019-2021) confirmed that market narratives take 5-6 years to play out, discouraging short-term speculators
“you'll recall that we went from having five companies in the junior space to having 500 companies in the junior space to falling to having 35 companies”
NextGen Energy's Rook One deposit in the Athabasca Basin is a world-class uranium deposit with a resource of 28.8 million pounds annually in the first five years of production, which at current uranium prices of $100+ per pound and using the company's $75 uranium feasibility study would generate after-tax NPV of approximately $5.8 billion and at $150 uranium prices could generate over $2 billion in annual after-tax free cash flow, placing it in the top 10 mining companies worldwide
“we outlined a just a 10year mine life um and averaging just over 9 million pounds of uranium a year so low cost uh high volume”
China is the most aggressive buyer of uranium in the global market, has entered multiple large contracts with Kazakhprom in the last 18 months that are each equivalent to over 50% of Kazakhprom's book value, is holding an inventory of 5,600 million pounds of uranium as a strategic state-owned asset, and is unlikely to release this inventory from the market because the uranium is held by state-owned corporations as a critical state security asset
“the Chinese entered two huge contracts with Kazam prom in the last 18 months very very large they were so large that on balance for each Chinese entity entering these contracts that that would equal more than 50% of the book value of consat prom”
Vision Uranium's Triple R deposit benefits from infrastructure advantages including proximity to the MacArthur River mine infrastructure, roads serving the property, power lines, and an exploration camp, which reduce drilling costs to well below $300 Canadian per meter all-in compared to $600-700 per meter at more remote projects, providing a significant economic advantage for development
“we were able to bring our drill costs in well below $300 Canadian all in all in a meter”
The Sprout physical uranium trust has grown from a NAV of 600 million with 18 million pounds of uranium in July 2021 to 6.7 billion, making it Sprout's single largest fund, with the fund having gained 89% in the prior year and up another 15% in early 2024, while only 4 million pounds of uranium were purchased in the spot market despite the 82% price appreciation, indicating the trade is not crowded by generalist money
“we're about 6.7 billion so the fund has grown by a multiple of about 10 and it's now Sprout's single largest fund... we have some investors that were very early in this trade and some of them are up 3x on their money”
A potential US ban on Russian uranium/enrichment services (with waivers through 2027) could trigger Russian counter-sanctions cutting off supplies immediately, a low-probability but non-zero risk scenario that is not currently priced into markets and would create a 1970s oil embargo-like price spike if implemented
“if there's a unilateral ban I think all bets are off um and uh that's not priced into the market let me put that make that clear... I think it's an outside chance”
CAMECO's Cigar Lake and MacArthur River uranium mines in Saskatchewan are facing production challenges and decline rates because they are mature operations that have been high-graded (mining the highest-grade ore first), and CAMECO has committed to delivering contracted pounds even as the mines face decline, forcing them to use more expensive production methods and spend more on exploration of adjacent properties
“cigar Lake we know based just on on uh you know the analysis of the M the deposit that has been done over the years that that it faces decline rates... phase one of cigar is set to basically be done with producing at the end of the decade you know 2028 2029”
NextGen Energy plans to begin construction of the Rook One project in 2024 following expected federal approval in early 2024, with the company fully funded for the first two to three years of construction through a combination of $450 million in treasury cash, recent equity raises at premium valuations from Australian institutional investors, and committed debt financing expressions of interest exceeding $1 billion
“we can be permitted in 2024 and immediately commencing construction”
Justin Huan predicted in October 2023 that Kazatomprom would miss 2024-2025 production targets due to sulfuric acid constraints and construction delays, a call that was subsequently validated when Kazatomprom announced production reductions, demonstrating predictive accuracy by analyzing capex spending patterns rather than company guidance
“I commend you on your comments the last time we spoke in October of 2023 you were actually discussing this and you said would be next to impossible for Kaza prom to meet their 2024 and 25 production numbers”
Sky Harbor Resources has adopted a project-generator model for uranium exploration in the Athabasca Basin, with 25 mineral properties of which two are being actively advanced (Russell Lake and Moore Lake) and nine have been optioned to partner companies that fund all exploration work, allowing Sky Harbor to obtain extensive exploration exposure without capital expenditure through partners like Orano, GNE Energy, and others who have committed over $80 million in total project consideration
“collectively all of these option uh agreements that we've sign total to over 80 million in Combined project consideration”
Rick Rule advocates focusing uranium investments on 15 high-quality companies that meet strict criteria: experienced management teams, world-scale deposits (2.5-3+ billion pounds recoverable resources), low all-in sustaining costs (<$80/lb), and term contracts providing production visibility, rather than pursuing speculative junior exploration plays
“I start with relevant experience in uranium if a company is headed by somebody who has failed in crypto failed in gold and failed in marijuana uh there's a high probability that he or she is going to fail in uranium”
Jonathan Hines believes the uranium spot price of $106/lb may be ahead of itself in the near term, but only because prices can pull back tactically while remaining well-supported by fundamental supply-demand imbalances; the fundamental case remains bullish as producers cannot quickly increase production regardless of current prices
“I'm prepared to say that the uranium price has gone as far as it needs to go in the next year... it wouldn't surprise me to see the spot price decline”
ISO Energy plans to reopen three past-producing mines in Utah (Tony M, White Mesa area) that operated in 2007-2009 and are already permitted with full surface infrastructure, with production targeted for late 2024 or early 2025 using a toll milling agreement with Energy Fuels' White Mesa mill
“we're going to open up uh at least one of those mines and we're going to start at Tony M go back in underground again these mines... they were fully developed... they're fully permitted they can be brought on back online very very quickly”
Vision Uranium's winter drill program will test multiple targets on Russell Lake including the Grailing East Zone, Fork Zone, and M Zone Extension over 5,000 meters, with results expected to generate continuous news flow from January through April-May, and a parallel 3,000-meter program at Moore Lake utilizing the same exploration camp
“we've just announced the plans for that program um it'll be commencing uh very very shortly um and it's 8,000 meters of drilling again 5,000 of that me of those meters will be carried out at Russell 3,000 meters will be carried out at more”