Ukraine fallout fuels new bout of interest in uranium stocks

There’s growing talk that power utilities are about to sign a rash of non-Russian supply contracts, with the likes of Boss poised to benefit; Plus, battery-types are queuing at Chalice’s door and Bellavista hits visible copper grading 5.7% in WA.

The ASX uranium sector is stirring thanks to the spot price for the nuclear power fuel pushing its way back above $US50/lb.

While not in the same league as lithium, uranium’s price performance in the past couple of years has been heart-warming stuff for the ASX developers and explorers.

The current spot price of $US51.50/lb (Numerco) compares with $US43/lb at the start of the year, and $US29.60/lb in January 2021.

There are good reasons for the price rise to date and the expectation that prices will continue to rise to the $US60lb-$US80/lb range needed to encourage new sources of supply.

Not the least of those is Russia’s war on Ukraine. Somewhat surprisingly, there continues to be no sanctions imposed on the purchase of nuclear fuel from Russia or its satellite states.

But with the war entrenched and escalating, the pressure is building on Western power utilities to reduce dependence on Russia by finding alternative supply sources.

And then there is the scramble in Europe to source alternatives to Russian gas supplies, not just for the winter, but for the long-term.

Amping things us is the realisation that the global decarbonisation and electrification push to counter global warming cannot happen without security of supply in energy alternatives, and that nuclear power is part of the solution.

All that has been captured in the latest nuclear power growth forecasts by the International Atomic Energy Agency.

The forecast has now been increased for the second year in a row. Under its high-case scenario, world nuclear power generating capacity is forecast to more than double by 2050, rising to 873GWe from current levels of around 390GWe.

The key drivers for the higher forecast were identified as climate change and energy security concerns.

So as much as the market’s current focus is on the metals critical to the world’s attack on global carbon emissions through electrification (copper, lithium, nickel, manganese and so on), nuclear power’s critical status is growing by the day.

And that’s going to be good for the uranium price. The world is already consuming more than it produces, stockpiles are becoming thinner by the day and Former Soviet Union supplies could become verboten for decades to come.

Against that backdrop the relative outperformance of the leading uranium developers on the ASX, Boss Energy (BOE) and Paladin (PDN) is understandable.

Boss is preparing its Honeymoon project in South Australia for first production in the fourth quarter next year while Paladin’s Langer Heinrich project in Namibia is targeting the first quarter of 2024. Both are low capex restarts with obvious leverage to upside in the uranium price.

And because history shows that when the world’s nuclear lower utilities seek out to secure future supplies, they do it en masse, with a potentially explosive impact on uranium prices to the upside. Industry feedback is that a contract-writing rush is just around the corner.

In anticipation of all that, there has been a step up in activity by the junior uranium explorers, noticeably with a focus on the potential of high-grade exploration properties. Their numbers include the likes of DeVex (DEV), Valor (VAL) and the neatly named (92E).

Biden:

The twin forces of decarbonisation and security of supply where also on full display with this week’s $US2.8 billion in grants from the Biden Administration to stimulate domestic production of battery materials for the electric vehicle revolution and for the storage of renewable energy.

And there was Dan Andrew’s pre-election commitment of $1 billion to speed up the phasing out of Victoria’s brown coal-fired power stations through direct investment in renewables. Don’t know how that one will go on the timeframe suggested but it is nevertheless another example of just how big the decarbonisation thematic has become.

Back to the US where three ASX-listed companies – Syrah (SYR), Piedmont (PLL) and Novonix (NVX) – scored grants totalling $A820 million to give their battery materials projects a push along. Soft dollar financing is welcome anytime, as was reflected in their respective share price gains of 11%, 9%, and 7% on the news.

Their “Made in America” projects across battery anodes and lithium go to Biden’s challenge for the US to reduce its dependency on China for battery materials, with securing supplies from friendly countries like Australia part of the response.

The latter is starting to come through, with Ford signing on for supply deals with BHP (nickel) and Liontown (lithium). And just last week GM got behind Queensland Pacific Metals (QPM) with $108 million in potential equity support for its proposed nickel/cobalt project.

It is likely just the start as other ASX companies with battery metals projects on the go are reporting that inbound inquiries from across the across the supply change, through to the end users, have stepped up in a big way, and not just from the US.

Chalice (CHN) – which confirmed a northern extension to its world-class Julimar nickel/copper/PGE discovery on Perth’s doorstep during the week – also advised that “several large international trading houses, downstream battery and auto manufacturers” have expressed interest in acquiring a minority interest in the project because of its nickel endowment.

“At this stage, discussions with potential partners are preliminary in nature and the company is focused on delivering the scoping study for a Gonneville mine (the discovery deposit at Julimar) development in late 2022,” Chalice said.

So no deal just yet but again demonstrating how both governments and industry are coming at the battery materials space to make decarbonisation happen.

Bellavista:

As BHP and other leading lights keep reminding us, there is no decarbonisation with copper, with production of the red metal needing to double in the next 30 years under a 1.5 degree climate change scenario.

It is a huge challenge as the pipeline of new projects needed to meet the demand surge, let alone maintain production at current levels, is not in place.

With that background, it is a wonder that the market in the recently listed junior Bellavista (BVR) didn’t fire up during the week.

It came to the market with a big land position in WA’s Edmund Basin considered prospective for big-time SEDEX-style (Mt Isa, Century and McArthur River) zinc-lead deposits. It continues to chase down that potential but has just added copper to the story.

Field mapping has identified a near-surface copper zone over 10sqkm at the Brumby prospect to the east of SEDEX focus area. More than 70 surface rock chip samples are in the assay lab, with the results no doubt eagerly awaited given portable XRF readings in the field of up to 5.7% copper.

Bellavista nevertheless traded steady at 19c on the news. The flat response reflected the market’s current lack of interest in exploration results of any kind unless they involve lithium. But that could well change in Bellavista’s case with the pending release of the assay results.