Justin Huhn – Part 2 Of Nuclear Fuels Demand And Supply Factors – Pro Tips On Investing In Uranium Stocks
Justin Huhn, Founder and Publisher of the Uranium Insider, joins me for yet another very comprehensive macro update on the supply and demand fundamentals for uranium and the nuclear fuel sector, how the longer-term contracting cycle is setting up, and then what he is watching and how he is positioning in the uranium equities in this most recent corrective move lower in the sector. This is a longer-format follow up to our prior conversation in April, because a lot of nuclear and uranium sector news has been announced, and Justin guides us through with pro tips on how to approach investing in this sector. (in fact, this may be the longest daily editorial we’ve ever put out on the KE Report, but it is packed with information, gets into a rapid-fire segment midway through, and then ends with a bang)
We start off reviewing the flurry of news out of Kazakhstan from the largest uranium swing producer in the sector Kazatomprom. In addition to a shortfall of sulphuric acid, increased taxes on production, expected to crimp supply; and yet a surprise announcement of an increase in overall production (while showing a big decrease in their JV production for Canada with Cameco), Justin walks us through all the nuances. We also discuss the continued unstable politics in Niger making future supply still in question, along with the Australian ban on the Jabiluka uranium deposit; blocking Energy Resources of Australia and Rio Tinto (RIO) from bringing that supply online. We also discuss expectations for production output from both Cameco (CCO.V) (CCJ), and the French producer Orano, which are not expected to grow output that much over the next year or two. All of this points to a much more constrained output from global uranium producers, even in face of growing demand.
One bright spot for production is the ramping up of production from US producers like enCore Energy (EU.V) (EU), Energy Fuels (EFR.TO) (UUUU), Ur-Energy (URE.TO) (URG), Peninsula Energy (PEN.AX) (PENMF), and Uranium Energy Corp (UEC). Justin provides his thoughts on investing in US-based uranium companies, what he feels their reasonable collective output levels are, and he also discusses the pros and cons of exploration companies and jurisdiction risk in certain states.
We then delve into all the increasing uranium demand from more countries committing to expand nuclear power buildouts, along with life-extensions on existing reactors, and the role that small modular reactors could have in powering AI data centers and manufacturing or in phasing out coal plants as another demand driver. Justin touches upon the ongoing bottlenecks with regards to sourcing enriched uranium fuel and enrichment & processing due to the recent sanctions placed on Russian supplies and the waivers that utility companies are waiting for more clarity on. He also breaks down the bifurcation between the expectations and sentiment from the utility companies and nuclear fuel buyers, compared to the realities that the uranium mining companies have been forecasting; with regards to realistic future mine supply and incentive prices.
Next we get into the key larger uranium development projects in the works and just how many years from actual production all of them are; with no new projects expected to come online until 2027 at the earliest, but likely a lot longer. This review includes the Arrow Project from NexGen Energy (TSX: NXE) (NYSE: NXE), the PLS (Patterson Lake) Project held by Fission Uranium (TSX: FCU) (OTCQX: FCUUF), that is currently being acquired by Paladin Energy (ASX: PDN) (OTCQX: PALAF), and the Phoenix Project held by Denison Mines (TSX: DML) (NYSE: DNN). While these are all very robust projects, they will not be adding to global production for at least several years, which raises the question of where all the new uranium supply will come from in the interim?
We wrap up by getting Justin’s thoughts on the uranium exploration stocks operating in the Athabasca Basin and Thelon Basin of Canada, and where the biggest opportunities and concerns are from his vantage point. With so many uranium discoveries having already been made, the question is posed if any new discoveries will ultimately matter to the medium-term supply fundamentals? Justin points to the ultra-high-grade uranium discovered over the last few years at the Hurricane Deposit, held by IsoEnergy Ltd (TSX: ISO) (OTCQX: ISENF), and the potential of using the Sabre technology from Orano to extract it, and additionally Denison’s Phoenix Project. If more deposits like that can be found, then it will be impactful, and could bring more projects up the development batting order.
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FREAKY FRIDAY AGAIN…………….. Have a great one….
Great discussion, appreciate the extended format.
With all the attention and money having flowed to high grade, high cost Athabasca, and given the uranium fundamentals, the path of least resistance for development and possibly investment opportunity, looks to be the agreement states Wyoming and Texas.
ISR may not be as sexy as SABRE, but the potential for great margins and positive permitting just might come into play at some point.
Good comments Eyeball Kid, and agreed about the advantages of the “less sexy” ISR mining in Wyoming and Texas with companies like enCore Energy, UEC, Ur-Energy, and Peninsula Energy ramping up production. Unlike most uranium juniors, at least these companies have pathways to revenues, and they can expand their production meaningfully on a percentage basis over the next 2-3 years, capitalizing on the higher U308 prices.
Energy Fuels also has some solid Wyoming assets, but then also has a lot of focus in Utah along with their processing center there. They also have assets spread out over other states like Arizona and New Mexico that may be a bit more challenging to extract (as Justin mentioned in the interview above). However, they’ve also expanded their Rare Earths business in sourcing material from other countries in Africa and South America, to then bring back and process in Utah.
I continue to be most heavily weighted to the US-based companies that have responded well to price action movement (both to the upside and downside), and they are much less risky that hoping assets in Niger or Kazakhstan or even Australia will work out, and they have revenues, unlike most Canadian uranium juniors.
Personally my portfolio still has some exposure to the Athabasca Basin of course, with best-in-class development companies like NexGen and Denison, but as mentioned in the interview, those projects are still several years away from making into into production by 2027, 2028, or later. Also I have taken a punt on a few of the Canadian explorers like Forum Energy, Cosa Resources, and Standard Uranium, because I like the odds of them to potentially make new discoveries.
An often-overlooked aspect of the value of a deposit is based on the jurisdiction where it is located not only from country to country but also within the same country. For instance, the mining costs of companies operating within Canada like Quebec, The Yukon, British Columbia, and Ontario can be totally different. This is important for investors interested in junior exploration companies where drilling results look favorable. If you have a 4-million-ounce deposit of gold in The Yukon, you will probably need to see an initial deposit of 5 million or more ounces of higher-grade gold. If you were in Quebec a 2-million-ounce deposit of gold might suffice.
Take a lead, zinc, silver miner like Santacruz Silver Mining Ltd. their operation works in part because the cost of mining is much less in Bolivia than it would be in Canada. This is more important when the price of commodities like zinc and lead are falling.
I believe that big investment firms like Sprott would have a computer program where you could punch in the size of a known resource, the jurisdiction, the infrastructure, government royalties, and the wage costs and come up with a quick summation of the profitability of a known deposit. This would be a great tool if small investors had access like the big guys to make a quick back of the hand resource calculation. In this day and age with computers something could be developed along these lines. Maybe such a program is out there, I don’t know, but I would find it useful. DT
Good points DT, on not just looking at resources in isolation, but also considering the jurisdiction pros and cons for costs, skilled labor, social license, permitting, taxation, etc…
I think some of the work my buddy Luc Ten Have is working on in with his Gold Discovery site is useful for crunching a lot of data and making comparisons, but it is more skewed to comparing exploration results and data if you are subscribed.
Additionally, the MineHub Technologies that Nick Hodge flagged in this weeks interview is crunching big data on assay results, jurisdiction, chain-of-custody, and more so it may be helpful for doing some analysis and comparisons between companies.
Thanks Ex, I knew you would be aware of any new technology. If you hear of something else, could you inform the board. Cheers, DT
I have a basket of uranium mining stock shares, to go along with the Sprott Physical Trust. I’ve had them a few years and I’m still up nicely on most of them–except for a few of the small-caps. The most important thing to me: taking profits after a run-up.
In the interview above with Justin the SABRE technology from Orano was discussed as possible applications to both Denison’s Phoenix Project and IsoEnergy’s Hurricane deposit.
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SABRE – A New Mining Method Coming To Life
11/30/2021
“In early November 2021, Orano Canada and its partner Denison Mines have announced a successful competition of the five-year testing program for the SABRE, the innovative mining method that Orano engineers have been developing for a decade. SABRE promises to become a game-changer in the industry, opening new perspectives for uranium mining in Canada.”
“SABRE is based on hydraulic borehole mining. This non-entry vertically selective approach to mining involves drilling access holes from the surface and extracting the underlying ore by cutting the ore using a high-pressure water jet and air-lifting the slurry to surface. It is a promising alternative to traditional open-pit or underground mining methods.”
“Canada is number 3 country in the world when it comes to uranium resources and number 2 in uranium production, so it’s a priority country for Orano’s exploration efforts, especially the uranium-rich Athabasca basin in the northern reaches of the country. However, in all probability the majority of the larger, close-to-the-surface and easily accessible deposits have been already discovered, with most current exploration targets generally looking at depths as far down as 1,000 meters.”
https://www.orano.group/en/news/news-group/2021/november/sabre-a-new-mining-method-coming-to-life