Uranium stocks rally as spot price hit 11-year highs, Russian exports at risk

Uranium prices rose 2.5% to US$63.5/lb, a fresh 11-year high after the bill to ban US imports of Russian nuclear fuel continued to gain support. Local uranium stocks have reacted promptly, with most names up at least 10%.

Its interesting to observe that most ASX-listed uranium stocks have struggled to push above last September highs, when uranium spot prices were trading around US$50/lb.

Most med-large cap uranium names like Paladin Energy (ASX: PDN), Boss Energy (ASX: BOE) and Deep Yellow (ASX: DYL) are down -10% to -20% from last September peaks. Factors weighing on recent share price performance could include:

• Capital raisings

• Broader market weakness

• Hawkish Fed

• Risk-off attitude towards growth stocks

There have been a few names that have managed to pull ahead of the crowd, including Lotus Resources (ASX: LOT) and Vimmy Resources (ASX: VMY) both of which hit multi-year highs on Friday. 

Step change for nuclear power

Nuclear power development is being taken up by an increasing number of countries amid surging oil and gas prices, and the unreliable nature of wind and solar energy.

Among the growing list of countries:

• France announced that 6 new reactors will be constructed, with a further 8 under consideration

• Poland has a small modular reactor schedueld for deployment from 2029

• Finland started its much-delayed Olkiluoto 3 nuclear reactor last month - originally due to open in 2009. The plant could supply as much as 14% of Finland's electricity needs

• Slovenia plans to close all coal-fired power plants by 2033 and construct a nuclear power plant as a replacement

• China has a massive pipeline of 150 reactors, 19 of which are under construction and 43 awaiting permits

Miners shifting back into production

Cameco, the world's largest public listed uranium company, announced that production will recommence at its McArthur River Mine.

The mine is one of the world's largest, and production is expected to reach 60% capacity by 2024.

Even as large miners and emerging players shift back into high gear, the industry is forecast to remain in a growing deficit well into 2035 and beyond, according to Paladin Energy.

Source: Paladin Energy Capital Raising Presentation March 2022

Price outlook

The Australian Government's commodity forecast, the Office of the Chief Economist, expects prices to lift from US$36.5/lb in 2021 to US$47/lb by 2027 (in real terms).

Despite the conservative price outlook, it said that "prices are expected to rise steadily, and potentially rapidly."

"Uranium mines typically take a long time to obtain approvals, potentially drawing out supply shortages over the longer term and creating a baseline for structurally higher prices in the late 2020s."

"The shortfall could lead to prices spiking significantly above forecast levels, though global reserves remain high among most major importers."