Uranium companies scored a wild rally in the first quarter of the year, but it has been interrupted and some have experienced sizable sell-offs over the past 2 months. Meanwhile, the Joe Biden administration is pushing U.S. lawmakers to pass a $4.3 billion package to purchase enriched uranium from domestic producers in an effort to curb imports from Russia. Should we prepare for a rally in uranium companies in the next part of this year?
- Nuclear power is cited as one of the green energy sources alongside wind or solar, and it leaves no carbon footprint. The sector benefits from the speculation common in the commodities market and the real prospects offered by nuclear power plants and energy independence. Uranium remains the most energetic resource on Earth, with a calorific value in 1 g equivalent to 3 tons of coal;
- According to Bloomberg Agency, officials from the Department of Energy are already after talks with congressmen, whom they convinced to increase uranium production on U.S. soil. The administration is afraid of stopping the supply of the raw material by the Russians, which in a perspective of several months would seriously disrupt the work of American nuclear reactors. Nuclear reactors in the U.S. are responsible for 20% of total electricity production, and account for nearly 50% of low-carbon sources;
- The U.S. still imports physical uranium from Russia (almost 17%), but there is a particular problem with its enrichment (HALEU), which is almost exclusively handled by the Russian company Rosatom; the capacity of the only U.S. company, Urenco, which enriches uranium, cannot match that of the Russian giant. Americans, including Senator Joe Manchin, who has been active in this field, want to change that and invest in the domestic industry. This could particularly benefit American businesses in the industry, which until now have been in the shadows because supply chains have not been disrupted and international cooperation has been successful;
- A company that has scored a massive rally recently and is still actively managed is Uranium Energy Corp (UEC.US). The list of U.S. uranium producers is very narrow; to date, the U.S. has primarily imported uranium from Canadian producers. UEC is the largest U.S. uranium producer, whose total capitalization is still relatively small today, about $1.2 billion;
- UEC announced on June 8 that it closed a transaction with Anfield Energy that resulted in it receiving $18.34 million resulting from the repayment of debt. In December 2021, UEC completed the acquisition of Uranium One i.e. the only royalty company in the uranium mining sector in the market, for $112 million in cash. This was the largest acquisition to date in the short history of U.S. nuclear companies. The company currently has no debt.
- As part of Anfield Energy’s debt repayment, UEC also swapped its properties with the company and gave up its interest in the state of Colorado and expanded its interest in the state of Wyoming. This provided UEC with 25 additional uranium properties (the ‘Charlie’ project and ‘Christensen Ranch’). UEC intends to include these in a portfolio of mines that can be mined using the most efficient mining method known as ‘in situ’ ISR. UEC currently controls the largest ISR uranium resource in the US. The company also holds an approx. 16% interest in Anfield on a per share basis. UEC’s portfolio of uranium-bearing assets in Wyoming increases UEC’s land holdings in Wyoming by nearly 50% and includes over 55,000 acres of federal mining claims and mineral leases;
- UEC has other mining projects in Wyoming including 9 projects in ‘Powder River’, 7 ‘Great Divide’ projects, 4 projects in ‘Wind River’, 3 projects in ‘Shirley’ and 1 project in ‘Black Hills’. The company is led by people with years of experience in both the nuclear industry and the Department of Energy. The company appears well positioned for a possible increase in interest in domestic uranium production within the US. UEC has fully operational Irigaray and Hobson uranium processing plants. In April, the company reported to the SEC the identification of record uranium deposits in Wyoming;
- Uranium Energy also has projects in New Mexico State, Texas, Arizona, and Mexico and Paraguay. Some of these already have federal mining permits including the Charlie project in Wyoming. The company also has its own physical uranium reserves of nearly 5 million pounds of U308 at an average price of $38 per pound. The company says it does not intend to divest believing in the long-term prospects of rising commodity prices;
- Uranium prices have been volatile, with a pound costing nearly $63 in April, but slipping to $46 in May. Uranium contracts are poorly liquid due to the strategic importance of the commodity and supply issues. Currently, the price is already at $52 and is trying to rebound.
- At the end of April, we saw one of the world’s largest uranium ETFs, NorthShore Global Uranium (URNM.US), change managers. It is now held by Canadian fund Sprott, owned by billionaire Eric Sprott. At the same time, Sprott is the world’s largest manager in the uranium market holding nearly $4 billion in uranium-related assets.
Uranium Energy Corp (UEC.US) chart, W1 interval. The company’s share price has been in a dynamic uptrend since the outbreak of the pandemic in 2020. It has gained over 1000% since the spring 2020 low. Fueling the rise in 2021 was news of massive purchases of physical uranium by uranium fund Sprott. We can see that UEC stock has an upward trend, which can be seen in the form of higher and higher lows, and a strong upward weekly candle can encourage bulls to enter the area above $5 where 23.6 Fibonacci retracement is located. At the same time, shares are characterized by enormous volatility, euphoria each time ended with panic selling. In the nearest future news from the DoE and US administration may again attract high volatility to uranium companies. Cameco, Energy Fuels, and Ur-Energy are also worth watching. Source: xStation5