Australian uranium shares surge on news of Kazatomprom production shortfall
Local uranium shares soared on Friday after news broke that Kazatomprom, the world’s largest exporter of the nuclear fuel, will likely miss potential production targets for 2024 by a fifth due to construction delays and problems obtaining sulphuric acid.
Kazatomprom’s woes sent Australian uranium shares rising and traders will be looking for another jump in the spot price, which marched through the US$100 per pound level just two weeks ago.
Kazakhstan’s national atomic company said it should be able to meet contractual supply agreements for this year. However, it’s Kazatomprom’s planned growth that has been affected.
It has mining permits for 20% more uranium output than it looks likely to be able to deliver.
Kazatomprom produced 21,112 tonnes of uranium last year, slightly less than in 2022.
This year’s output by the company’s mines is expected within the range of between 21,000 and 22,500t, 20% below the amount stipulated in subsoil use agreements.
Sulphuric acid hard to come by
Sulphuric acid is vital as a reagent in Kazatomprom’s in situ leaching process, according to the London-based World Nuclear News.
Some 60% of the world’s sulphuric acid supply is used for fertilizer production and a combination of increasing demand within the fertilizer sector for the acid and strained supply chains have led to global acid shortages.
Kazatomprom is just one customer suffering from the shortfall.
Australian producers gearing up
Unlike the 2007 uranium price boom, several Australian companies are getting into position to boost this country’s stake in the world market.
Boss Energy (ASX: BOE) is moving into production at its Honeymoon project in South Australia, while Paladin Energy (ASX: PDN) will restart its mothballed Langer Heinrich mine in Namibia in the first half of this year.
Also in Namibia, Deep Yellow (ASX: DYL) is well-advanced and also looking to develop the Mulga Rock deposit in Western Australia, while Bannerman Energy (ASX: BMN) has a large low-grade resource at Etango that becomes more economically attractive with each jump in the uranium price.
Elevate Uranium (ASX: EL8) is also in Namibia and has 5 drill rigs set to be active across its projects, with three active at its Koppies project.
Meanwhile, Peninsula Energy (ASX: PEN) is currently bringing its Lance project in Wyoming back into production and Lotus Resources (ASX: LOT) is now approaching a final investment decision to produce uranium again at the Kayelekera mine in Malawi.
On the home front, Toro Energy (ASX: TOE) is looking to enlarge the resource at its advanced but long delayed Lake Maitland project near Wiluna, which is fully permitted.
Still well off the record
While the uranium spot price’s spectacular rise in 2023 — it is now around double what it was last January — has revived investor interest in the sector’s stocks, in real terms the current price is only half of what it reached in 2007.
That year it nudged US$136/lb which, adjusted for inflation, represents a price of US$332/lb in 2023 values.
Fortunately, the outlook for the sector is a good deal rosier and well-founded now than 17 years ago.
At that time, the surge in the uranium price set off a largely ill-planned frenzy with more than 200 juniors at one stage either rushing to peg potential uranium ground or suddenly claiming existing tenures had potential for uranium as well as the existing mineral targets.
The Canadians invented the term “moose pasture” to categorise the pegged ground held to be worthless in terms of uranium potential.
The frenzy soon went off the boil and most of the uranium hopefuls switched to other commodities.
Demand driving price
Just a week ago, Australian broking firm Shaw and Partners came out with a prediction of a US$150/lb spot price in 2025.
Apart from the expected growth in reactor numbers around the world, Japan has been bringing its nuclear power stations back on line while US utilities have reached the stage of needing to sign new supply agreements as old contracts expire.
Contract prices are typically higher than the spot.
The other contrast, as shown above, is that Australia now has a critical mass of companies with advanced or developing projects, unlike the largely early exploration stage that applied in 2007.
With a decade-long suppressed spot price for those now-established uranium companies, the wait has been long and often frustrating.
Now, however, their patience looks set to be rewarded.