Toronto-based precious metals fund manager Sprott Asset Management, already a trend-setter in precious metals, has now sent a wake-up call through the uranium space.
It is absorbing Toronto-listed Uranium Participation Corporation (UPC) and reshaping it as Sprott Physical Uranium Trust, which will soon be joint-listed on the New York Stock Exchange (NYSE), and offering uranium exposure for American investors.
UPC is the world’s largest publicly traded investment vehicle offering exposure to uranium (outside traditional mining company shares).
It holds almost 16.27 million pounds of uranium oxide in concentrate (U3O8) and 300,000kg of uranium hexafluoride (UF6), with that inventory worth C$665 million (A$703.3 million).
US investors will now have exposure to physical uranium
But here is the main point: it and another physical uranium fund are both traded outside the US; there was no at-hand mechanism for American investors to take position in physical uranium.
You can expect that, once the deal is bedded down by mid-year, Sprott will use its NYSE listing to raise fresh new money and increase its stocks of physical uranium (and thus potentially forcing a further squeeze on supply).
Sprott has a client base of more than 200,000 investors. These people are already gold and silver bulls, so it won’t take much to win them over to the uranium story.
The move is being seen as a huge boost for uranium sentiment, as the spot price nudged back up over US$30 per pound, with the latest price this week showing at US$30.40/lb.
ASX stocks hitting 52-week highs
Also indicating that uranium is past its worst is the performance of ASX stocks, all of them recording 52-week highs in recent weeks.
A uranium recovery began to be evident mid-2020 as it became clear that a uranium squeeze was only a couple of years away.
The fact that just six mines around the world produce two-thirds of the uranium needed to power the 442 reactors across 31 countries demonstrated the unpreparedness of the industry for any surge in uranium demand.
In the past 16 years, China has gone from three nuclear power stations to 45.
Also in 2020, 20 new reactors were due to be connected to grids.
Hundreds of new reactors planned
Moreover, another 495 reactors were to be built or already under construction, with projections of demand reaching 247Mlb per year (compared to 170Mlb at present).
Some 85% of that 170Mlb is supplied through long term contracts.
Nuclear electricity output increased 2.8% in 2018, the best growth since 2010.
In addition, many US utilities are facing uranium supply contract renewals in the next two or three years, which is going pressure mine supply.
Also, planned shutdowns of some reactors are likely to be shelved now that the US Congress has approved support payments to keep them open and generating electricity.
‘Start of a bull market for physical uranium’
Sprott specialises in precious metals and controls four commodity funds (gold, silver, platinum and palladium) with about US$12 billion (A$15.5 billion) under management.
“We believe our global brand, fund marketing experience, and client base of more than 200,000 investors will improve trading liquidity and grow UPC’s asset base during what we believe is the start of a bull market for physical uranium,” Sprott chief executive officer John Ciampaglia said.
The company’s precious metals trusts are listed both in Toronto and New York, and money for them raised in the latter.
New confidence in uranium stocks
The performance of Australian ASX-listed uranium stocks over the past 12 months reflects the new-found confidence in the uranium story.
Paladin Energy (ASX: PDN) recently successfully raised $218.7m as the company seeks to restart the infamous Langer Heinrich mine in Namibia of which the company has a 75% stake. Its shares closing out the week at a 52-week high at $0.515.
Boss Energy (ASX: BOE), which has received all permits and is poised to restart the Honeymoon mine — and so become Australia’s newest uranium producer — has seen its share price of $0.05 in mid-2020 recently hit $0.20.
Deep Yellow (ASX: DYL) reached its 52-week high in February of $0.89, compared to its low in last May of $0.20.
The company is carrying out 700 to 800-hole drilling program in Namibia and expects to announce an updated resource estimate late this month.
Lotus Resources (ASX: LOT) has moved upwards from $0.052 to a high of $0.203 but its Malawi story will get additional exposure — and, like its African peers, is working in a jurisdiction that is free of the anti-uranium politics that have dogged Australia’s exploitation of its vast endowment.
Bannerman Resources (ASX: BMN) has been working on its Etango project in Namibia since 2006, but a significant step is about to be taken as its pre-feasibility study nears completion. The company’s 52-week share price has risen from a $0.026 low to peak of $0.19.
Vimy Resources (ASX: VMY) recently raised $18.5 million for its Mulga Rock project in Western Australia — that amount in itself being another sign that investors have the bit between their teeth — and plans early work in the second half of this year. Vimy has seen its shares run from $0.027 to $0.16 in April.
Marenica Energy (ASX: MEY) has risen from $0.05 to $0.25 while Alligator Energy (ASX: AGE), which is about to begin an airborne electromagnetic survey of its recently acquired Big Lake project in South Australia, is up from $0.004 to $0.022.