The Energy Show

Interview with John Ciampaglia, Sprott Physical Uranium Trust

Our previous interview: https://youtu.be/u1E49AFixRY

Recording date: 24th January 2024

Uranium’s Rising Tide Floats Investors’ Boats

After years of neglect, the uranium market lies poised for an extended rally. Key tailwinds supporting higher uranium prices have converged at an opportune moment for investors to profit from a sustained bull run. Key factors behind uranium’s bright prospects include:

Electricity and Emissions Goals Unattainable Without Nuclear Power

Global electricity demand will increase 50% by 2050 and over triple in developing economies. Simultaneously, aggressive decarbonization targets necessitate massive nuclear energy growth. Tripling or quadrupling nuclear generation best aligns a low-carbon grid with growing populations and economies. This means uranium demand for reactors will need to expand from 77,000 tonnes currently to upwards of 300,000 tonnes annually.

Massive Supply Ramp Ups Required

Against burgeoning demand, existing mines only supply around 50,000 tonnes of uranium per year right now. Boosting global output 6-fold requires exploring for and developing deposits not economical below $60 per pound historically. With the spot uranium price recently topping $100, project economics improve dramatically. However, the long permitting times means substantial production increases remain years away still despite incentivizing pricing now.

Sustained Higher Prices The Cure

For new exploration spending and capital investment into mine builds to occurred at the scale required, uranium prices likely need to stay elevated for an extended period. Contracting between miners and utilities will help anchor pricing. Market equilibrium levels could emerge around $100 per pound or higher. This prolonged period of favorable pricing will finally cure chronic underinvestment in new supply the nuclear industry critically needs.

Top Leveraged Investment Options

Uranium miners, especially junior developers and explorers, offer explosive upside as their resources become economical at higher prices. Streaming/royalty companies gain upside exposure while avoiding operational risks inherent across the mining lifecycle from exploration through to production. Physical uranium ETFs directly participate as spot prices rise. All offer investors differentiated ways to play the next uranium bull cycle unfolding as demand races ahead of stagnant supply, necessitating much higher prices in turn to rectify the imbalance over the long-term.

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Recording date: 23rd January, 2024

Uranium spot prices have crossed $100/lb, yet uranium equities have not seen commensurate gains. Keller explains that more sustained spot price appreciation is needed to signal upcoming contract negotiations before investors respond more enthusiastically. Mine supply remains unable to satisfy reactor demand, with top producers Kazatomprom and Cameco struggling to meet their own guidance targets. Meanwhile, several new reactor construction projects continue globally. This divergence suggests higher uranium prices are required to incentivize new production investment.

In the US, idle in-situ leach (ISL) capacity is coming back online in sites across Utah, Wyoming and Nebraska. For example, Energy Fuels has reopened the White Mesa Mill. However, Keller believes US supply increases are incremental and insufficient to plug the growing demand gap. Consolidation of US ISL production under major banner like Cameco could drive efficiency gains. But new conventional mines face high capex requirements. The US lacks major projects that can meaningfully impact global shortfalls. Still, higher prices improve economics across US uranium production.

In Canada’s prolific Athabasca Basin, firms like NexGen Energy are advancing the Arrow deposit, but first production is likely 4+ years away given technical obstacles like ground freezing and permitting delays, especially on new extraction methods. Africa offers better prospects to address short-term supply needs, given past production success and political stability in countries like Namibia. Projects like Global Atomic’s DASA mine development could be funded by export agencies to fill Western utility needs. However, project finance complexity persists. Overall while quality deposits exist globally, major new supply will take time to come online.

Developers like Denison Mines, Forsys, and Boss Energy have seen strong stock gains on the back of uranium’s price resurgence. Their prospects rise if deficit forecasts hold, spurring further growth by mid-decade. However, developers must make tangible progress through final investment decisions to break ground on new facilities. Those securing financing and getting steel in the ground will be key winners. Markets are watching closely for those advancing projects like Valencia in Namibia or Honeymoon in Australia to key production milestones. Care is still required given permitting and cost overrun risks.

With uranium’s popularity growing again, hundreds of new explorers may soon enter the market. However, during the last bull run, over 600 listed uranium juniors flamed out after 2011. Investors should focus on experienced operators like Cameco, NexGen and Encore Energy progressing assets rather than chasing hype-driven stories. Asset quality and execution ability are vital filters before investing in any uranium proposition. While retail excitement is building, investors must watch that this does not spawn another bubble and divert attention from high potential companies primed to deliver new supply when needed most.

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Interview with Dustin Garrow, Uranium market expert and consultant

Recording date: 19th January, 2024

Deep Yellow has meticulously executed a growth strategy to establish itself as an emerging leader well-positioned to capitalize on the coming uranium supply crunch. While utilities and regulators worldwide increasingly recognize nuclear power’s essential role in stable clean energy grids, mines struggle to expand capacity after years of low prices. This sets the stage for outsized returns for nimble uranium producers as demand surges.

Deep Yellow’s seasoned leadership team offers the vital experience needed to navigate mine development amid tightening markets. As proven mine builders and operators, they provide investors a strong hand on the wheel. Their construction decision for the massive Tumas deposit in Namibia approaches in 2024, where state-of-the-art in-situ recovery techniques can unlock value. Alongside, the Australian Mulga Rock project advances through feasibility studies.

These core assets anchor Deep Yellow’s launch toward targeted production topping 10 million pounds per year. With its timeline aligned to forecast supply deficits, the company can ink early contracts with desperate utilities as competitors delay. This promises strong cash flows to underpin expansion and reward shareholders. Deep Yellow’s foundations rest on two pillars – world-scale resources and elite operational expertise.

But the growth story does not stop there. Deep Yellow has amassed extensive exploration ground at two prime locations in Namibia and Australia through astute acquisitions. The proximity of these sites to flagship projects enhances infrastructure leverage across its portfolio. Their prospectivity offers outstanding potential for satellite mining centers to extend production beyond anchor assets.

As uranium prices breach multi-year highs, Deep Yellow remains disciplined, avoiding dilutionary financings that plague juniors during boom times. Thanks to shrewd stewardship, the company controls treasury reserves exceeding A$50 million, exceeding all junior peers. This treasury might alone cover initial capex, securing Deep Yellow’s production timeline against delays.

Rising electric vehicle adoption and energy security concerns drive uranium’s resurgence, with spot prices likely constituting the thin edge of the wedge. Deep Yellow promises leverage to the full uranium value chain - from exploration upsides to production cash flows and takeover potential. Its strategy aligns with the realities of the nuclear renaissance dawning.

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With Brandon Munro, CEO/MD of Bannerman Energy

Recording date: 12th January 2024

Kazatomprom, the globe’s largest uranium miner supplying 40% of output, stunned markets this week by announcing it will undershoot 2023 production guidance by 10% due to persistent acid supply shortages hampering its operations. The Kazakh state-owned company said it will maintain a reduced capacity utilization of 80%, rather than increasing output to 90% of planned levels as previously targeted. This news of significant additional supply constraints from the industry’s dominant player ignited fierce buying that propelled uranium prices above $100 a pound for the first time in over a decade.

For investors, the latest shock underscores mining complexity risks even for seasoned incumbents but also showcases the worsening supply-demand imbalance as new reactor demand growth increasingly outpaces what existing mines can provide. With primary production already under pressure, any further losses from leading suppliers like Kazatomprom will only tighten the alarming supply deficit opening in front of the market—fanning the flames for continued price increases according to textbook fundamentals.

In fact, rather than distressed at its shortfalls, some analysts speculate Kazatomprom may need to become a net buyer of uranium if issues extend. And with its overt struggles to source adequate pounds, utilities reliant on its contracts are already likely paying maximum contract escalation rates to secure available volumes. So despite its downgrade, its sales remain solid for now. But shortages loom on whether alternative mines can backfill any significant production losses.

And beyond just the Kazatomprom cut impacting available supply in front of rising utility procurers, several other imminent catalysts lend further upside potential. These include the Russian sanctions bill working through US Congress that may soon restrict western access to Russian-origin uranium when signed into law. Though diluted from initially proposed outright bans, its public company waiver process still presents a formidable deterrent effect likely shrinking accessible supply by chilling buyer willingness.

Adding fuel, the sanctions risks sparking financial entities to begin building strategic inventory positions in the metal to aid SMR fuel needs. And with primary production mostly stagnant despite demand forecasts showing massive growth from expanding global reactor fleets, the investment case looks increasingly robust for developers able to help plug the upcoming supply shortfall from constrained incumbents like Kazatomprom struggling to play catchup. So while sector hype builds, investors should carefully vet projects on execution ability and production likelihood rather than promoters’ flashy claims alone.

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Recording date: 12th December 2023

Neil Young, CEO and Managing Director of Elixir Energy joins Merlin Marr-Johnson to talk about the oil and gas sector. 

COP28 is the topic du jour, with Neil pointing out that trying to curb energy supply does not curtail demand. Oil and Gas is not Tobacco. Human instinct is for bettering life, which involves access to energy. Industry consolidation continues as Neil predicted, and he expects new mid-tier spin-outs to emerge from the super-majors to help populate the private sector ecosystem. Neil mentions the dynamism of the US oil sector and the technical innovation led by the super-majors. All of which is needed to battle decline rates from existing production, and to help meet future demand.

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COP 28

The Net Zero Nuclear Industry Pledge, which commits to a goal of at least tripling nuclear capacity by 2050, was unveiled at an event at the UN's COP28 climate change summit taking place in Dubai, United Arab Emirates.

Twenty-two countries have signed up to the goal of tripling global nuclear energy capacity by 2050, at the UN's COP28 climate change conference. Countries include: Bulgaria, Canada, the Czech Republic, Finland, France, Ghana,  Hungary, Japan, South Korea, Moldova, Mongolia, Morocco, the Netherlands, Poland, Romania, Slovakia, Slovenia, Sweden, Ukraine, the United Arab Emirates, the UK and the USA.

USA made two announcements at COP28. The first was the release of a suite of EXIM financial tools to support SMR deployments and help U.S. exporters compete in this global market.

The second announcement was made alongside Canada, Japan, France and the UK, known as the "Sapporo 5". They announced their collective intent to support the increased deployment of zero-carbon, peaceful nuclear energy by expanding nuclear fuel production capacity across trusted, high-quality suppliers free from manipulation and influence. A total of US$4.2B will go towards increasing uranium enrichment & conversion over the next 3 years to secure the global supply chain.

The UAE's Emirates Nuclear Energy Corporation (ENEC) has signed a number of agreements with small modular reactor and micro-reactor vendors to explore opportunities for the commercialisation and global deployment of their designs.

Boss Energy & enCore Energy

M&A activity has hit Aussie shores. Boss Energy has completed a A$205M placement and announced that they will acquire 30% of enCore Energy’s Alta Mesa ISR Project in South Texas for US$60M cash transaction.

A$205M Placement.

30% acquisition of enCore’s Alta Mesa. 

SPUT has purchased 456,000 lbs since last week bringing total inventory to 63.1 MMlbs. SPUT’s net asset value has now reached US$5.16B.

Winner of the Week

BHP is considering nuclear energy to power what will be the world’s biggest potash mine in Saskatchewan, Canada, in a move that would help the Australian mining giant achieve its net-zero emissions target by 2050.

Bungle of the week

Awarded, rather tongue in cheek, to the collective uranium bears that all thought that uranium was going nowhere. When we recorded the energy show on 19 October the spot price was US$69/lb. Today we are sitting at US$81/lb – up 17% in 7 weeks - and the outlook remains strong.  

Whilst it is important to always test the weaknesses in a thesis – and negativity is an important fuel for this reflection – the Bungle recipients have recently talked down the market potential based on ill-founded or heavily exaggerated risks.

Recording date: 16th November 2023

A recent uranium conference provided an upbeat outlook on market fundamentals and future growth potential in the sector. Industry executives conveyed confidence that the transition to a supply deficit will continue lifting uranium prices higher in the years ahead. However, they cautioned that bringing new mines online to meet rising demand will prove challenging.

After years of oversupply pushed prices to unsustainably low levels, the tide is now turning. Top producer Kazakhstan plans to cut 20% of production through 2023. Meanwhile, demand keeps expanding as Japan restarts reactors and new units are built worldwide. This mounting supply-demand imbalance will require prices over $60 per pound to incentivize new mine projects.

Spot prices around $75 today still appear muted compared to where they need to head to ensure adequate investment in new capacity. Prices could spike far higher in the coming years if supply tightens too quickly before new projects are developed. Mine restarts will help stabilize production, with Boss Energy's Honeymoon project in Australia targeting 2023 and Lotus Resources' Kayelekera mine in Malawi aiming for 2025. But greenfield projects require more time and capital.

Presenters emphasized that today's spot price understates strengthening uranium fundamentals. It serves as a lagging indicator of where the market is heading. Many analysts see prices marching higher into the $80s and $90s in the next 12-18 months. This will better reflect the cost of replacing reserves and developing new mines. Market experts expects uranium could hit $100 per pound when today's thin inventories leave less cushion against potential supply shocks.

For investors, the current opportunity lies in securing shares of companies with assets that can deliver uranium into a high-priced market within the next several years. Near-term producers will capture the most upside. CEOs at the conference expressed confidence that capital markets will fund new projects once prices reach adequate levels. But developers need to avoid prematurely overpaying for assets today based on unfounded hype about a potential uranium bull market ahead.

In summary, the uranium market has clearly flipped into deficit conditions that will worsen until prices rise enough to bring new supply online. Investors should target companies with advanced, de-risked assets in reliable mining jurisdictions that can achieve production within a few years when uranium demand is forecast to substantially exceed primary mine supplies. The sector offers leverage to an inevitable recovery, but projects take time to permit and finance. With curtailed exploration, discoveries peak production just as existing mines enter depletion. This sets the stage for greater volatility ahead, increasing the value of deposits that can be built to prevent projected shortfalls from becoming reality.

Bannerman Energy

Bannerman Energy is an Australian uranium development company focused on advancing its flagship 3.5Mlb pa open pit uranium project in Namibia, a major global uranium producer. Bannerman is currently working on Front End Engineering and Design (FEED) and financing for the Namibia project. The company also holds a significant 41.8% stake in Namibia Critical Metals, developer of the large-scale Lofdal heavy rare earths project in Namibia, one of only a few heavy rare earth deposits outside China.

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Interview with Olga Skorlyakova, Vice President, Market Strategy, Bannerman Energy

Recording date: 2nd November 2023

The uranium industry has seen 2 significant events happen in the past 2 weeks.

NEI hosted their annual International Uranium Fuel Seminar in Charlotte, North Carolina, from October 22-24. This esteemed event brought together over 200 leaders from nuclear energy utilities, the uranium industry, and the broader nuclear fuel cycle industry from around the world. The seminar serves as a forum to discuss and explore key issues related to the nuclear fuel cycle, as well as current trends and future prospects.

The seminar's main takeaway is the prevalent optimism about future demand for nuclear-generated electricity. However, there is significant concern about how the fuel cycle industry will meet long-term uranium, conversion, and enrichment needs.

Geopolitical issues, especially potential sanctions on Russian-origin fuel, were major topics, prompting discussions about reducing reliance on Russian supplies. There was also concern about the impact of Russia and China on Kazakhstan, a significant uranium supplier, and challenges with the new Trans-Caspian route for uranium shipments.

News from International Forum on Natural Uranium Industry –

Cameco Marks Uranium Supply Agreement with China Nuclear International Corporation - https://www.cameco.com/media/news/cameco-marks-uranium-supply-agreement-with-china-nuclear-international-corp

Last weekend (October 28-29) the 1st International Forum on Natural Uranium Industry took place in Beijing, China. The forum was a huge success, bringing together international organisations, governments, academics, industry experts & major uranium enterprises, to promote global exchange, discussions & collaboration in the industry. On the second day, CNNC organized a technical tour to visit the China In-situ Leaching Smart Mine in Tongliao, Inner Mongolia.

Over the past 70 years, the China National Nuclear Corporation (CNNC) has capitalized on opportunities to become a leading force in domestic natural uranium exploration and development. CNNC has established a core competency system for the complete natural uranium industry chain, which includes scientific research, exploration, development, design, and engineering applications. Furthermore, CNNC has constructed a "four-sphere Integrated" supply assurance system that covers domestic and overseas development, international trade, and strategic reserves.

China powers uranium exploration, development to new level - https://www.chinadaily.com.cn/a/202310/29/WS653db3dfa31090682a5eb45e.html

In October, the enrichment sector received a highly anticipated and impressive set of news.
As the west looks to move away from Russian enriched uranium we have seen more attention on increasing capacity of enriched uranium around the world.

Orano announced that its board of directors approved an investment of €1.7 billion. This funding aims to increase the production capacity of the Georges Besse II (GB-II) uranium enrichment plant at the Tricastin site by over 30%, equivalent to 2.5 million SWUs.

https://www.orano.group/en/news/news-group/2023/october/board-of-directors-of-orano-approves-project-to-extend-the-enrichment-capacity-of-the-georges-besse-2-plant

Earlier this year, in July, Urenco announced plans to increase capacity at its US plant in New Mexico - the only operating commercial uranium enrichment facility in North America - by 15%.

https://www.world-nuclear-news.org/Articles/Urenco-to-expand-US-enrichment-plant

Enrichment operations have started at US nuclear fuel and services company Centrus Energy Corp’s American Centrifuge Plant in Ohio.

https://www.world-nuclear-news.org/Articles/Enrichment-operations-start-at-US-HALEU-plant

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Recording date: 1st November 2023

The first of an Oil & Gas focussed Energy Show, with Merlin Marr-Johnson & Neil Young, MD of Elixir Energy (ASX: EXR)

The recent wave of major oil and gas mergers in the US, such as Exxon acquiring Pioneer Natural Resources for $60 billion and Chevron acquiring Anadarko for nearly the same amount, signals the start of a new era of consolidation in the sector. According to Neil Young, CEO of junior E&P company Elixir Energy, this is reminiscent of the 1990s when the Seven Sisters merged into today's super majors.

These deals demonstrate that oil and gas majors have a long-term bullish view on fossil fuel demand, despite the energy transition. If they believed oil demand would soon decline, they would be divesting assets rather than acquiring. Young believes global oil demand is highly unlikely to decline in absolute terms any time soon. Factors like increasing plastic usage and internet data demand will continue to drive growth.

Carbon capture and storage (CCS) will play a major role in enabling continued oil and gas demand while reducing emissions. Exxon, Occidental and others have recently made multi-billion dollar investments in CCS technology and companies, showing this is now being embraced by the industry. CCS costs are coming down and government incentives like the US Inflation Reduction Act provide further support. The NOCs are also getting involved in CCS.

The junior E&P sector has struggled to attract capital in recent years. But these latest mergers suggest there will be a capital cascade as the majors divest non-core assets and private equity moves into the space. Assets in safe jurisdictions like Australia will be particularly sought after following events like BP's exit from Russia. Ultimately, the junior sector is essential for new exploration, while the majors are better placed to develop large discovered resources.

The future is bright for nimble juniors like Elixir Energy to find and prove up new resources. Renewables will play an increasing role in the energy mix, but cannot fully substitute for oil and gas yet. With CCS reducing emissions from continued fossil fuel use, oil and gas will remain vital to support development and living standards for decades to come. These mergers confirm the majors' faith in this outcome, underpinning the junior sector's opportunity.

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Recording date: 27th October 2023

We are grateful to have Dustin Garrow, Managing Principal of Nuclear Fuel Associates, to provide an overview as uranium is bucking broader equity market trends and attracting generalist funds. Conversations indicate utilities are focused on securing future uranium supply as restarts come online and more long-term contracting is expected, particularly from US utilities to support diversification. 

Due diligence is increasing on potential new projects in Africa and North America as established producers commit production to Russia and China. Utilities are changing procurement strategies with over-purchasing and over-committing to contracts to ensure the security of supply. The market is transitioning to favor sellers as mobile inventory declines globally as both demand and supply side fundamentals have changed with SMRs, nuclear growth forecasts, and new national nuclear programs influencing procurement strategies. 

Overall the market is entering a new phase where utilities must learn how to contract from a diverse supplier base amidst rising prices. The next 6 months could see exciting developments.

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