Uranium sector comes in from the cold

The ASX-listed uranium sector has come in from the bitter cold of the last 11 years, buoyed by the relentless global decarbonisation push and security of supply concerns caused by Russia’s invasion of Ukraine (writes Barry FitzGerald on MiningNews).
16th June 2022

The sector was forced into hibernation 11 years ago when the Fukushima nuclear power plant in Japan suffered a meltdown and radioactive release after being hit by an earthquake and a subsequent tsunami.

Uranium prices collapsed to less than US$20/lb for a time as much of the world turned its back on nuclear power, forcing mine closures and the deferment of mine development plans. But the rise of the decarbonisation thematic in more recent years has turned the tide.

Zero emission nuclear power is increasingly seen as part of the solution to combating global warming, prompting greater government support for the industry, and fuelling a 52% price increase for uranium in the last 12 months to $48/lb (spot).

That is still short of the $60-65/lb level considered necessary to incentivise the new mine developments needed to avoid what could become critical supply shortages in the back half of the decade due to the long standing situation of demand exceeding mine supply.

The current forced global economic slowdown as the major economies seek to rein in inflation means that incentive pricing is unlikely to become a permanent feature anytime soon. But unlike the passing inflation fight - and the resultant equity markets meltdown - the decarbonisation imperative is here for the long haul.

The uranium price did get to $63.75/lb in April on fears that supplies from the former Soviet Union would be sanctioned in response to the Ukraine invasion. As is the case with the other key energy sources of oil and gas, that has not happened, not yet anyway.

But there are moves afoot to wean the Western world off FSU supplies for uranium and more pressingly, the need to beef up non-FSU enrichment and conversion capacity. The latter is why President Biden is seeking $4.3 billion to fund the US's disentanglement from an uncomfortable reliance on FSU supplies.

Biden's move prompted a 10% spike in the ASX-listed uranium sector when it was revealed last week. The gain has been given back since in the broader market sell-off. But the uranium sector is at least riding higher than would have been the case.

It also means that at long last, the number of ASX-listed producers is set to expand.

Following the recent sale of the last drum of uranium from stockpiles at the Rio Tinto-controlled Ranger uranium mine in the Northern Territory after nearly 40 years of continuous production, uranium production by Australian interests is limited to BHP's by-product output at its Olympic Dam copper mine in South Australia.

The only other Australian uranium mine is the US-owned and privately held Four Mile operation, also in SA.

But uranium production by ASX companies is set to increase to three with the planned return of Boss Energy's Honeymoon project in SA (suspended in 2013), and Paladin's Langer Heinrich operation (suspended in 2018) in Namibia.

Read more at https://www.miningnews.net/barry-fitzgerald/opinion/1434154/uranium-sector-comes-in-from-the-cold

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