Categories:
Energy
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General Market Commentary
Topics:
General Energy
/
General Market Commentary
2019, the return of the long-awaited Uranium Bull?
As you may know Azincourt Energy, in addition to its lithium exploration projects, has two advanced uranium exploration projects in the prolific Athabasca Basin, Saskatchewan, (as well as an early stage exploration project in the Picotani volcanic field, Puno, Peru). As some of you might know, the Athabasca Basin is one of the world’s most prolific regions of uranium production. It is best known as the world's leading source of high-grade uranium and currently supplies about 20% of the world's uranium.
It is important that we take a moment and understand where the uranium sector is today. We are currently witnessing a dramatic ongoing uranium supply disruption. Apart from precious metals, all commodity bull cycles are largely dependent on one simple material phenomenon, “supply disruption”, and nothing at the moment says more to supply disruption in any commodity than the nuclear fuel metal itself, uranium.
Let’s dive into this a bit more and have a look at the facts.
Rule number one for any supply disruption: Have producers drastically cut production? The answer is a most resounding “yes”.
Kazatomprom, the world’s largest uranium producer, started this process by cutting output by 10 percent in early 2017. This was followed by uranium giant Cameco suspending Athabasca-based McArthur River, the world’s largest uranium mine, in late 2017, bringing 10% of the global production off the market. Paladin cancelled a planned expansion and announced it will mothball it’s Langer Heinrich mine in Namibia. Then Kazatomprom followed with two additional production cuts bigger than the first, with its continuing value over volume strategy.
Rule number two for a supply disruption: Has market demand for uranium been rising? Again, the answer is “yes”.
For starters, primary producers such as Cameco are buying large volumes in the spot market to fulfil their contracts and delivery obligations to utilities i.e. producers of nuclear power. Secondly, long term strategic investors such as the London-based Yellowcake Fund is buying at least 8M lbs. of yellow cake, 5% of the global production, annually and other big funds are being established to hold yellow cake as well.