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Mining
Uranium prices first left a decade-long slumber and surged to 10-year highs in September 2021 on a buying spree from global fund manager Sprott that vacuumed pounds out of the lightly traded spot market for the nuclear fuel.
It brought junior explorers ignored by investors for years back to prominence.
One of them, 92 Energy (ASX:92E), surged nearly four times over in a month from 22c to 80c, peaking at 83c in April 2022.
Since then it has been emblematic of the more measured and cautious approach of uranium investors.
Governments have been more bullish on nuclear energy since Russia’s invasion of Ukraine prompted a push to reclassify it as ‘green energy’, and contracting by soon to be short-supplied utilities is ramping up. But while prices have threatened a handful of breakouts, they have been rangebound, hovering around the US$50/lb mark.
That has been enough to see companies stewarding old operations chart a path back to production.
READ: Why this uranium cycle will be different for Paladin Energy
Canadian giant Cameco green-lit the return of the giant McArthur River mine in Saskatachewan, Boss Energy (ASX:BOE) has approved the more than $100m redevelopment of the Honeymoon mine in South Australia, Peninsula Energy (ASX:PEN) is restarting the Lance ISR mine in Wyoming and Paladin Energy (ASX:PDN) expects to be producing early next year at its mothballed Langer Heinrich mine in Namibia.
Prices will likely need to climb beyond US$65/lb and above to justify new mines coming to production.
But recent exploration results as high as 9.66% U3O8 — the equivalent of 0.5m at 176g/t — have seen 92Energy’s share price stabilise.
The question is, will the market’s rebound support not just the revival of legacy players but also the emergence of new greenfields developers like 92E and its projects in Canada’s high grade Athabasca Basin?
92 Energy MD Siobhan Lancaster is, like many uranium explorers, bullish on the outlook for nuclear power in what is one of the biggest global reactor builds seen in decades.
“They are the best fundamentals we’ve seen in a very long time. Japan is restarting its nuclear reactors, and they’ve just announced new builds,” she told delegates at the Resources Rising Stars conference on the Gold Coast today.
“China’s nuclear program is absolutely gigantic, as is India, it’s looking good and they’re going down the path with nuclear. Korea has announced that they’re going to go 30% (nuclear) energy.
“And really we’re looking at nuclear power extensions in the US, Belgium and Japan. So all of these things feed into the market, it’s a very, very exciting place to be.”
The key for 92 Energy will be its 1163km2 land holding on the edge of the Athabasca Basin.
The locale is the host of some of the world’s highest grade uranium deposits, including Cameco’s McArthur River and Cigar Lake, and the mined out Rabbit Lake.
After the high grade hits seen in a more than 4000m winter drilling program, Lancaster says 92E’s prospects, led by the Gemini target where the near 10% intercept was hit, are dead ringers for some of these monsters.
It comes on the back of a hit last year at Gemini of 42m at 0.5% U3O8 and others earlier this year as high as 6% U3O8 over a small interval.
“That was the eighth best publicly available uranium intercept drilled globally last year, which is pretty significant, because all of those other drill holes came from established uranium deposits,” Lancaster said.
“So this is really an emerging new uranium deposit in the Athabasca basin.
“What’s really interesting is this zone is a dead ringer for Rabbit Lake, which was actually an area that was mined in the Athabasca basin, very successfully mined, very economic, that had 35 million pounds at an average mined grade of 0.32%.
“So our grades are actually looking very similar to that. It’s a very nice starting position to have.”
Also enticing is the presence of dravite, a mineral pathfinder associated with the highest grade deposits in the Athabasca.
Its Wares prospect is another ‘dead ringer’, for IsoEnergy’s Hurricane project, which has indicated resources grading a bonkers 34.5% U3O8.
“Some of the grades in Hurricane have been up to 70% and the average grade is sitting around 20%,” Lancaster said.
“So it’s super high grade, that had uranium at the unconformity there and a swarm of conductors coming down towards that.
“That’s what this is looking like, this is something that we’re really prioritising and hopefully we’ll be able to get into drilling sometime this year.”
Whether 92E is successful will be in the hands of the assay gods.
But Lancaster and her team, whose experience includes a run at Extract Resources before its multi-billion sellout to a China’s CGNPC at the tail and of the last cycle, are well aware of what can happen when uranium runs.
“We’ve got an excellent board and management team who were all around during the last uranium cycle, myself included was part of the Extract Resources team, we sold the Husab uranium discovery for $2.2 billion,” she said.
“The key point there to point out is, that was a uranium explorer, just like 92 Energy was.
“It started off with a market cap of $2 million and exited for $2.2 billion. So it really does show the potential upside for a good uranium story.”
Lancaster is not the only uranium bull on parade on the Gold Coast this week.
Boss Energy’s MD Duncan Craib, who says the SA miner remains on track for fourth quarter production, says the market is well poised at this stage in the contracting cycle.
With product on the spot market tight, utilities are growing more aggressive in their push to sign new long term contracts.
After signing up for 114Mlbs of new material in all of 2022, 99Mlbs have been mopped up in 2023 so far, putting uranium miners on track to beat last year’s number by the end of June.
“We thoroughly believe there’s going to be a pinch point between now and the next three years where it’s likely to give an over-reaction to the commodity price because there’s simply not enough new uranium supply,” Craib said.
“It follows that the best deal a new uranium producer can enter into in a rising market is to enter into market related contracts with a strong floor and a high ceiling.
“Cameco’s quarterly announcement just made reference that the floors are now US$45-50, ceilings at around US$75-80/lb.”
Given spot market prices were under US$20/lb five years ago, it is a big shift. Which producers will get in at the right time remains to be seen.
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