Energy

Vimy Resources to capitalise on projected uranium deficit

Fri 17 Dec 21, 2:23pm (AEST)
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Source: (Image credit: Vimy Resources)

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Key Points

  • Mulga Rock project set to boost WA’s economy by $200m
  • Vimy touts Uranium’s ESG potential
  • Uranium supply deficit projected for 2025 onwards

Vimy Resources commences Mulga Rock Uranium project

Vimy Resources (ASX: VMY) has achieved substantial commencement at the company’s Mulga Rock Uranium project. 

The company has begun mining activities, with the excavation of a pit ramp, the construction of a water pipeline, and the continued development of a camera trapping and conservation plan. 

Mulga Rock holds one of Australia’s largest undeveloped uranium resources. The project is located 290km East of Kalgoorlie, Western Australia. 

Commenting on the news, Executive Director and CEO Steven Michael, said:

“Vimy can now advance Mulga Rock to the next stage of development and will continue to work closely with State and Federal departments to secure the remaining approvals required to bring the project into production by 2025 – when uranium market commentators are forecasting the commencement of a prolonged supply deficit.”

Investor response

Yesterday’s announcement saw Vimy pop 5.13% on opening as investors reacted positively to the milestone. The stock dropped -2.57% upon opening today, before climbing back up to match yesterday’s close within minutes. 

Intraday, Vimy shows minimal trading volume of 31.2% below the company’s 10-day average. 

Mulga Rock set to boost WA’s economy

The Mulga Rock project is expected to employ over 550 people during construction, along with 350 site-based employees during operation. 

Forecasts also suggest that the project will create more than $200m in state royalties over its 15-year lifespan. 

Vimy touts Uranium’s ESG potential

“Bringing Mulga Rock into production will materially mitigate global GHG emissions and enhance Western Australia’s ESG credentials,” says Michael. 

The company notes if used in nuclear reactors which displaced coal-fired electricity, Mulga Rock’s uranium would reduce carbon dioxide emissions by 64 million tonnes. 

Based on Vimy's numbers, this represents 12% of Australia’s greenhouse gas emissions, or 70% of Western Australia’s emissions. 

Aside from reducing greenhouse gas, Vimy’s Sandhill Dunnart Conservation Plan was recently shortlisted for a Golden Gecko environmental award. 

Uranium’s turbulent recent history

From the early 2000s to June 2007, Uranium rose from US$10/lb to $140/lb. 

The huge growth came after a significant supply and demand skew. At the end of 2006, the Nuclear Energy Agency stated that uranium production was only meeting 60% of global reactor needs. 

The boom was swift. In 2005, the ASX had 34 uranium stocks. 

By late 2006, the ASX had more than 200, many with huge valuations. Paladin Energy (ASX: PDN), for example, rose 330% in that year. 

However, the combination of the global financial crisis and the 2011 Fukushima disaster ended up lowering prices. 

Uranium was left out in the cold with prices plunging to US$18/lb in November 2016. 

Recent kicker

In 2021, however, uranium has spiked to 9-year highs, rallying to US$50/lb in September.

The growth comes from nuclear energy emerging as a low-carbon energy solution with big ESG potential. 

Another source of the growth comes from Sprott Asset Management, which had amassed 30 million pounds of uranium - almost a third of the total spot volume of 92.2 million pounds in 2020. 

Sprott’s buying squeezed the market, contributing to the September 9-year high. 

With ESG factors becoming increasingly influential, it remains to be seen whether Mulga Rock can tap into the explosive growth experienced by the likes of Paladin Energy during the 2006 uranium boom. 

Written By

Jed Herne

Content & Strategy

After graduating with a 99.4 ATAR, Jed won 3 scholarships to Curtin University, where he earned his Bachelor's degree and served as a Student Ambassador. He is primarily interested in long-term passive index funds as a vehicle for financial independence. Outside of covering financial news, Jed is a published author, podcaster, and has an unhealthy obsession with bouldering.

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