Uranium supply crunch intensifies as Sprott Asset Management flags global shortfalls

Global precious metals and critical materials investment specialist Sprott Asset Management has highlighted the growing global uranium supply uncertainties facing the nuclear industry.

In its latest uranium report labelled “Uranium Bull Market Takes a Healthy Pause”, Sprott said that, while there have been a number of recent uranium mine restarts, current supply is significantly below the world’s uranium reactor requirements.

It also noted that secondary supplies that have filled in supply gaps in the past are no longer available for sale.

A report written by Jacob White, an exchange traded fund product manager at Sprott, suggested the correction in February uranium markets experienced following a rapid run-up was merely a healthy pause in the ongoing uranium bull market.

The report also highlighted the recent news that leading international uranium suppliers Kazatomprom and Cameco have revealed they are having issues meeting their previous production guidances.

Re-energising the market

Sprott also suggested geopolitical issues may have impacted a proposed uranium mining deal between France – the world’s third-largest uranium consumer – and Russian neighbour Mongolia.

“US efforts to diminish reliance on Russia represent another geopolitical risk to uranium markets,” the report said.

It noted that the Prohibiting Russian Uranium Imports Act (the Act) – which would limit imports of Russian supply to 2027 and ban them after that – passed the US House in December but it is still pending a vote in the Senate.

Sprott pointed out that a Russian state-owned uranium company Tenex has warned American customers that Russia might pre-emptively bar exports of its supply to the US if this act were to pass, further exacerbating supply uncertainty, especially in North America.

However, Sprott believes the recent setbacks to uranium supply might re-energise markets, especially given lingering geopolitical considerations.

Supply deficit set to increase

The Sprott report suggested that declining global uranium mine production numbers will see supply being well short of the world’s uranium reactor requirements and that this deficit will build over the next decade.

It also noted that near-term supply is being inhibited by long lead times and capital intensity and that restarts and new mines in development are critical.

“The uranium price target as an incentive level for further restarts and greenfield development is a moving target and we believe that we will need higher uranium prices to incentivise enough production to meet forecasted deficits,” the report said.

“Over the long term, increased demand in the face of an uncertain uranium supply may likely continue supporting a sustained bull market.”

Calls for WA support

Locally, Western Australia’s Liberal party is suggesting that now is the right time for the government to support uranium mining in the state.

While it is believed WA has world-class uranium assets, there are currently no active mines due to historic regulations that make it particularly difficult to obtain development approvals.

WA opposition leader Libby Mettam recently declared that, if she is elected as leader of the state government in 2025, uranium miners would be able to proceed through the same environmental approvals as other minerals.

Ms Mettam highlighted that the potential mining of the energy metal is particularly attractive at the moment, with uranium prices rocketing upwards this year on growing nuclear power usage around the globe.

Her backing for a resumption of uranium mining was welcomed by the Minerals Council of Australia (MCA).

MCA chief executive officer Tania Constable said the policy shift promises to lift the current unwarranted moratorium on uranium mining.

Local miners ready to strike

A number of local companies are waiting on policy change so that they can step up their WA uranium mining plans.

They include Cauldron Energy (ASX: CXU), Toro Energy (ASX: TOE) and Deep Yellow (ASX: DYL).

To the east in South Australia, where no such anti-uranium mining moratorium exits, Boss Energy (ASX: BOE) is ramping up production activities with its restart of the historic Honeymoon mine.

Set to be Australia’s next uranium producer, the Honeymoon project is a fully-permitted uranium operation with an export licence and established infrastructure that will provide a valuable new supply to global markets.