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Stars are aligning for uranium price rally ANALYSIS
| Sector sees a new phase of investment in nuclear energy
Hudbay makes discovery near Rosemont in Arizona COPPER
| Location held small mines that
operated from mid-1800s to mid-1900s BY TRISH SAYWELL tsaywell@northernminer.com
W
Temelín nuclear power plant in the Czech Republic. ISTOCK/MARTINLISNER
BY FRIK ELS
T
Executive Editor, MINING.COM
he uranium market is emerging from years in the doldrums as the overhang from the nuclear disaster in Japan is cleared and global demand picks up steam. The spot price for U3O8 moved above US$30 per pound for the first time this year as uranium producers and mine developers hoover up above-ground inventories and reactor construction continues apace. Two new research notes from BMO Capital Markets and Morgan Stanley say current prices of around US$30.50 per lb. marks a floor and predict a rally in prices over the next few years to the ~US$50 level by 2024. The stars seem to be aligning for a new phase of nuclear energy investment with the U.S., China and Europe bolstering the bull case for the fuel this month. Although nuclear energy was not mentioned explicitly in the US$2 trillion infrastructure proposal U.S. President Joe Biden released on March 31, its federally mandated “energy efficiency and clean electricity standard” is hardly achievable without it. Leaked documents in early April showed a panel of experts advising the EU is set to designate nuclear as a sustainable source of electricity, which opens the door for new investment under the continent’s ambitious green energy program.
China’s 14th five-year plan released on March 11 also buoyed the uranium market with Beijing planning to up the country’s nuclear energy capacity by 46% — from 48GW in 2020 to 70GW by 2025. There are several factors working in uranium’s favour, not least the fact that annual uranium demand is now above the level that existed before the 2011 Fukushima disaster when Japan shut off all its reactors: • Uranium miners, developers and investment funds like Yellow Cake (13 million lbs inventory built up so far) are buying material on the spot market bringing to more normal levels government and utility inventories built up over the last decade. • Major mines are idled including Cameco’s Cigar Lake (due to Covid-19), which accounts for 18 million lbs or 13% of annual mine supply. The world’s largest uranium operation, McArthur River was suspended back in July 2018 taking 25 million lbs off the market. • Permanent closures so far this year include Rio Tinto’s Ranger operation in Australia (3 million lbs) and Niger’s Cominak mine (2.6 million lbs), which had been in operation since 1978. Rio Tinto is exiting the market entirely following the sale of Rössing Uranium in Namibia. • Like Cameco, top producer Kazatomprom, which mined 15% less material last year due to Covid restrictions, has committed to
below capacity production (–20% for the state-owned Kazakh miner) for the foreseeable future. • Price reporting agency and research company UxC estimates that utilities’ uncovered requirements would balloon to some 500 million lbs by 2026 and 1.4 billion lbs by 2035. • Roughly 390 million lbs is already locked up in the long term market while 815 million lbs have been consumed in reactors over the last five years, according to UxC. • There are 444 nuclear reactors in operation worldwide and another 50 under construction — two new connections to the grid and one construction start so far in 2021. • Much cheaper and safer, small modular nuclear power reactors, which can readily slot into brownfield sites like decommissioned coal-fired plants (or even underground or underwater) are expected to become a significant source of additional demand. There are caveats to this rosy scenario, however. Morgan Stanley warns that “the opacity of the inventory situation remains a key uncertainty to price — see for example palladium, which needed almost seven years of deficit before the price really took off.” BMO says given the still high levels of inventories, “acute shortages and price squeezes are extremely unlikely, both for this year and the foreseeable future,” adding that “there is no obvious need for new mine supply in the near future.” TNM
hen Hudbay Minerals (TSX: HBM; NYSE: HBM) acquired Augusta Resources in September 2014, the key objective was to advance its Rosemont copper project, which if put into production will be one of the largest copper mines in the United States. But the acquisition also brought with it a package of patented mining claims on private land within seven km of the open-pit project, which held about 20 small pick and shovel underground mines that had operated between the mid-1800s and mid-1900s and produced about 440,000 tons of copper at an average grade of 4.42%. “When we took Augusta over we were most keenly interested in the half-billion-tonne Rosemont project, but also knew they had identified and knew about some of these what we’d call satellite opportunities for copper in a historic district,” says Cashel Meagher, Hudbay’s senior vice president and chief operating officer. “The district was then known as Helvetia, but Augusta had identified three potential resources, Broad Top, Copper World and Elgin Peach, so we knew the exploration targets were there. We knew they were future opportunities, but at the time our primary focus and concern was Rosemont itself, redoing the feasibility study and moving that through to production, and knowing that those exploration opportunities would come after our focus on developing Rosemont itself.” With Rosemont currently suspended due to legal challenges over its plan to put some of the project’s mining infrastructure on federal land, the time seemed right to kick off exploration in the area and at the same time, make sure through condemnation drilling for Rosemont, that any planned water and power pipelines wouldn’t be built on prospective geology. “While we’re waiting for Rosemont to be decided in the ninth circuit in the court of appeals we felt this was an opportunity to evaluate these targets we always knew existed,” Meagher says. “With respect to the lawsuit, our view is that since the mid-1800s the mining laws of the U.S. have supported the use of federal lands for mining
MINERS RAISED $4.8B IN PRIVATE PLACEMENTS LAST YEAR / 6
“WHILE THEY ALL HAVE DISTINCT NAMES AND WHILE THERE ARE 20 SEPARATE HISTORIC MINES IN THERE, WE BELIEVE IT’S ONE MINERALIZED TREND.” CASHEL MEAGHER SENIOR VICE PRESIDENT AND COO, HUDBAY MINERALS
infrastructure, and we believe that in the Ninth District our appeals will be upheld.” In the meantime, the 20-odd historic mines on the property near Rosemont signaled there was “smoke,” he says. “There was definitely good mineralization to justify mining so many mines. We wanted to see if we could compile the data and see if the mineralization See COPPER / 7
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