Sprott’s latest edition of Gold Talk Radio with Ed Coyne provides listeners with a fall uranium update.
Despite a challenging macroeconomic backdrop, uranium has had a big year in 2022. Coyne had special guests Sprott Asset Management CEO John Ciampaglia and WMC Energy’s Per Jander on to unpack the autumnal prospects for uranium.
Uranium did get caught in the market downdraft back in April but managed a turnaround while other areas of the economy struggled. “What’s interesting to us is that May and June were very difficult markets for just about every asset class, but around the first week of July, we noticed that physical uranium and uranium stocks started to decouple from the general equity and bond markets, which remained under selling pressure,” said Ciampaglia, pointing out that uranium stocks are likely one of the best-performing equity groups across the entire market since July. From July 6th to September 15th, uranium stocks are up in aggregate roughly 35%. Ciampaglia said, “I can’t think of another group that’s had that kind of bounce.”
Ciampaglia thinks the rebound was partially inspired by the Japanese Prime Minister announcing that Japan would need to restart more nuclear power plants to ensure stable energy this winter. Though the physical market is a cornerstone, equities are also starting to come to life. According to Ciampaglia, “the lead times are very long to develop new mines and it’s critical for the industry to rise to this challenge and to deal with the supply gap that’s been building for several years.”
Uranium Supply and Demand
Pivoting to the supply/demand situation, Ciampaglia noted that “what the market is trying to solve here is the annual demand of about 180,000,000 pounds of uranium to supply enough fuel for all the existing reactors operating today. Last year primary mine supply was only 130,000,000.” This is leading a lot of investors to be bullish on uranium.
Jander, fresh from the World Nuclear Symposium in London, said of the event, “there is so much good news. John mentioned Japan coming around and trying to make a push to restart as many reactors as they can. They are even mentioning a new build, which no one thought would happen ten years ago after Fukushima.” Jander continued, “the Koreans are making a 180-degree shift as well. They are now going full-steam ahead on the nuclear program, not just their domestic one and they are also going to export a lot of the technology.” California has also decided to keep its plant at Diablo Canyon.
One Big Contingency
Jander also discussed the big contingency at the symposium that was talking about small modular reactors, which could be a critical technology in the not-too-distant future. Jander stated, “reactors are the focus of the nuclear industry is, so far, reactors for producing electricity. The Director General touched on it very well in her opening address, that we’re making very good progress on the electricity side of things, but also other areas where nuclear is starting to be able to look at how they can make a very big difference. It could be industrial processes, heating and cooling of buildings, even shipping that has used crude oil, and nuclear liners.”
Coyne says that despite all of the good news, “It certainly feels like we’re still in the first inning of this whole project.” Ciampaglia concurred, stressing how healthy the fundamentals are in the space. Perception and sentiment are also important though, and Ciampaglia thinks the world is starting to understand how critical nuclear power will be to a green future.
“I think the world is looking at a very unfortunate case study in Germany,” Ciampaglia said, “a country that decided years ago to phase out its nuclear power and shift to rely on renewables and Russian natural gas. Germany, a country that’s always professed to be very green and progressive, is burning enormous amounts of coal to provide electricity.”
Investors interested in uranium can get exposure through the Sprott Physical Uranium Trust (U.U).
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