Aspiring uranium miners are buying the metal like never before, a sign the market for nuclear fuel is heating up after a decade in the cold.
The market for uranium, used largely to fuel nuclear power plants, has been glutted since the Fukushima reactor meltdowns in 2011. Miners and some investors say that is changing after years of OPEC-like discipline by the two biggest producers. Adding to their optimism, governments including the Biden administration and Beijing see a role for nuclear power in global efforts to mitigate climate change.
Investors have been sending shares in companies including Canada’s
Denison Mines Corp.
and Corpus Christi, Texas-based
Uranium Energy Corp.
higher starting late last year. The
which tracks shares of companies with operations linked to uranium and nuclear components, has surged 78% since the end of October.
The gains have led to a new phenomenon: Aspiring miners are raising cash to buy the commodity that they hope to dig out of the ground. That is unprecedented in such large quantities, traders and analysts say.
One reason is the vagaries of the market for uranium, which is unlike that for most other commodities. Between 70% and 80% of uranium ore concentrate is sold in long-term contracts to utilities with nuclear-power plants.
Companies that are still exploring or developing mining projects are making the purchases to reassure utilities that they have uranium to offer when inking deals. They are also looking to build up collateral to help obtain cheaper funding for new mines.
By taking supply off the market, the buyers are fueling optimism that uranium prices will finally recover.
Prices remain low by historical standards. The weekly spot price of a uranium compound known as U3O8 was $29.20 a pound on April 19, well below the $73 uranium fetched a little over a decade ago, according to UxC LLC, a nuclear-fuel data and research company.
Futures contracts, used by investors and companies to bet on or hedge against price moves, are rarely traded for uranium. Even the spot uranium market is sleepy: Traders often make only a handful of transactions a week.
Some money managers are betting prices are finally about to catch a break. A glut in the supply of uranium has been whittled down after Kazakhstan’s National Atomic Co. Kazatomprom JSC GDR and Canada’s
, the two biggest miners, curtailed production in recent years.
Investors’ enthusiasm for stocks with low-carbon credentials has enabled smaller uranium companies to raise cash and buy uranium. Some have done so years before they plan to dig it out of the ground for themselves.
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In total, junior miners and investors have bought nearly 10.5 million pounds of uranium in recent weeks, according to UxC. That represents a large slice of the overall spot market, which typically turns over 60 million to 80 million pounds a year.
Denison, which is seeking to develop a mine in the central Canadian province of Saskatchewan, this month said it had bought 2.5 million pounds of uranium for roughly $74 million. It raised the money by selling shares and warrants, taking advantage of investors’ renewed appetite for its stock. Denison is up 61% in New York this year.
Capital markets “have not been this open in a very long time” for uranium companies, said Denison Chief Executive David Cates. “I’m not sure they ever were.”
Denison hopes to use the uranium as collateral to obtain lower funding costs when it borrows to finance the Wheeler River project, Mr. Cates said. It plans to sell the material to utilities when the mine is up and running.
enCore Energy Corp.
bought 200,000 pounds of uranium in March after raising 15 million Canadian dollars, or about $12 million, from a share sale, rather than a targeted C$8 million. The material offers a safety net in case its project runs into any delays or disruptions, said Chief Executive
EnCore could also sell the stockpile if uranium prices climb.
Miners aren’t the only ones snapping up uranium. Funds that act as vehicles for investors to bet on uranium prices have been active too, adding to the buzz among traders.
London-listed Yellow Cake PLC, a company that acts as an exchange-traded fund for uranium, bought 4 million pounds in March after raising $140 million from selling shares.
“It’s an industry that’s coming back after a decade in the cold,” said Kevin Smith, managing director for energy metals trading at commodities merchant Traxys Group. “It’s not going to the moon, but it will continue to move up.”
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