Uranium getting a glow as North America puts nuclear power ‘front and centre’

Tim Gitzel, the boss of Canadian uranium heavyweight Cameco, thought he was dreaming at a recent dinner in Ottawa.

There up on stage was President Joe Biden and Prime Minister Justin Trudeau talking about the critical role of nuclear energy and the importance of nuclear collaboration between Canada and the US.

“It was almost hard to believe, like a dream come true,” Gitzel recounted at Cameco’s more recent March quarterly release.

“Nuclear energy would never have made top billing at a meeting between our countries even a few years ago. So it gives you a sense of just how important nuclear power and the fuel cycle to support it have become.”

The dinner was followed up by a joint statement by the US Department of Energy and Natural Resources Canada on nuclear energy co-operation.

“I don’t know if you have read it yet, but I can tell you it is really positive and puts nuclear power front and centre,” Gitzel said.

“It is the kind of signal from government that our industry has been waiting for, for a long time.

“And while the statement was largely focused on North America, it went even further. It addressed the need to work together globally as the world grapples with providing clean, reliable, affordable and secure energy.”

As it was, at the recent G7 meeting in Japan, five of the G7 nations, Canada, the US, the UK, Japan and France, created an alliance to leverage their respective civil nuclear sectors.

“This agreement will support the stable supply of nuclear fuels as well as the nuclear fuel needs of future advanced reactors. Almost every day in the news, you will find more examples of that same sentiment being expressed,” Gitzel said.

“Whether it is the improving public opinion for nuclear power, changing policy decisions in support of nuclear or market-based solutions being pursued, there is increasing evidence of the strong momentum for nuclear, evidence that supports full-cycle demand growth for nuclear power and the uranium fuel required to run the reactors.”

From all that it can be taken that Cameco is super-bullish on uranium/nuclear power.

“In fact, I’m not sure there has ever been a better time to be a pure-play investment in the growing demand for nuclear energy,” Gitzel said.

The same uranium buzz was evident at the World Nuclear Fuel Cycle 2023 conference in the Hague last month.

Canaccord said this week that all the attendees it had spoken to are singing from the same hymn sheet: demand is expected to pick up, over-feeding is occurring, security of supply has never been more important, political support is apparent and mine supply needs to increase.

No wonder then that the uranium price has been powering up of late. The spot price is currently $53/lb, which is up from an average of $US50.48/lb in March quarter, itself up from $49/lb in the previous corresponding period. Go back two years and the price was $US28.95/lb.

Cameco’s executive vice president and CFO Grant Isaac reckons that the contract or term price of around $US53/lb-ish should be thought about as the “bottom of the market, the absolute floor from which the leverage is possible on top of that”.

ASX-listed uranium stocks have been mirroring the price rise for uranium by powering up. Not in a major way just yet, but watch out if the case for more uranium gains outlined by Cameco becomes a reality with $US60/lb-plus prices.

Boss Energy (ASX: BOE) Australia’s next uranium producer, as it likes to call itself, is one to benefit from the uranium outlook being the best it has been in a decades.

The company said in its March quarterly report that the restart of its Honeymoon project in South Australia was on track for first production in the December quarter. Ahead of the return, Boss acquired 1.25m/lbs of uranium now worth more than $100m as a derisking exercise.

Canaccord has a $3.22 price target on the stock (currently $2.50). It has uranium getting to $US75.40/lb in 2024. Macquarie has a $3.20 price target and uranium getting to $US68.80/lb in 2024.

Those sorts of uranium prices will fire up interest in the ASX-listed uranium explorers in a big way. One of them – 92 Energy (ASX: 92E) – put its hand up for some early attention on Thursday when it released high-grade uranium exploration hits from Canada’s home of high-grade uranium mines, the Athabasca Basin.

Drilling 65m south of the known mineralisation at its Gemini discovery returned 9.66% uranium over 0.5m within a hit grading 1.47% uranium over 5m. There was also a 0.93% hit over 2.5m within a hit of 0.35% uranium over 15.5m.

And another hole drilled 1km north of the known Gemini zone contained dravite – a pathfinder clay mineral observed in the region’s big and super high-grade deposits like Cameco’s McArthur River.

An immediate follow-up drilling program is planned. The stock put on 2c to 40c.

Meteoric:

Amanda Lacaze, the boss of the leading rare earths stock Lynas (ASX: LYC), made a passing reference during the week at the Macquarie conference to the rise of South America’s clay-hosted rare earths industry.

She didn’t mention any companies in particular but there was a nod of sorts to the contingent from Meteoric in the audience.

Meteoric was mentioned here last week on the expectation that it was about to announce a world class resource at its Caldeira project in Brazil.

It didn’t disappoint, announcing on Monday the maiden estimate had come in at 409Mt at 2,626ppm total rare earth oxide at a 1000ppm cut off. At a 2,000ppm cut-off, the estimate was 271Mt at 3,146ppm.

Sprott said Caldeira was an absolute monster. “Our conservative guess was 200Mt at 3,000ppm – this smashed it on all metrics. Quite simply, this is a disruptive asset,” Sprott said.

So it is huge and high grade. China controls the rare earths industry by mining similar ionic clays which grade between 600ppm and 1500ppm at best.

And like the Chinese industry, Meteoric can now start think about a low-cost development (20% of hard rock development costs) with low operating costs (perhaps as low as $US15/kg compared with upwards of $US60kg for hard rock developments).

Having said all that, last week when the pending maiden resource estimate was mentioned here, Meteoric was trading at 17c a share.

It has since weakened to 14.2c. Not totally surprising because the stock has run up from 1.5c in December when the project was first picked up.

So the big volumes going through are profit-takers on one side of the trade, and on the other side, those excited by a project capable of taking on the Chinese. According to Sprott, it is a must-own.

No wonder then that there was that nod by Lacaze across the room at the Macquarie conference.

As mentioned last week, Lynas is currently the only serious player in the rare earths space apart from the Chinese. Its strength comes from the quality and scale of its hard-rock Mt Weld mine in WA.

But the company has also flagged an interest in adding a clay-hosted project to its portfolio. Apart from anything else, they come with a high count of the permanent magnet metals critical to global decarbonisation.