Uranium futures spiked to $US48.55 ($66.16) per pound (lb) on Wednesday, the highest price since 2012 as the market anticipates a new yellowcake cycle.
The price of uranium was $US52.25/lb in January 2012 before it simmered to weaker levels, dropping to as low as US$17.75/lb in November 2016.
Wednesday’s nine-year peak is, however, a far cry from the all-time high of $US140/lb recorded in June 2007. However, optimism that uranium’s value will continue to rise is building.
This week’s rising price follows Sprott Physical Uranium Trust’s $US1 billion “At The Market” (ATM) renewal, which allows it to sell shares and use the money to buy physical uranium.
Tribeca Investment Partners portfolio manager Guy Keller said this was two to three times larger than what the market was anticipating.
“The original (Sprott) facility for $US300 million purchased just shy of seven million pounds,” Keller said.
“This is the equivalent of five per cent of last year’s primary mine supply and resulted in the spot price appreciation of 40 percent from mid- August lows.
“Another billion dollars assuming an average purchase price of say… $US45 per pound means (Sprott) will soak up 25 per cent of annual primary mine supply, who knows where the price lands.”
Sprott finalised a deal with Uranium Partticipation Corporation to form Sprott Physical Uranium Trust in July.
It has since become the world’s largest publicly listed physical uranium fund after going live in mid-August.
Canaccord Genuity Capital Markets stated that Sprott is shifting the momentum of uranium through its ATMs.
“In our view, this is an early indication of just how tight the market is,” the firm reported. “And with (Sprott) now a very active physical buyer, we expect upward pressure on prices to continue, which in turn is likely to put pressure on utilities to revisit long-term contracting – a key catalyst for higher prices.”
Boss Energy chief executive officer Duncan Craib echoed the sentiment for a new uranium cycle when he presented at the Diggers the Diggers & Dealers Mining Forum in August.
The company is currently developing its mothballed Honeymoon uranium mine in South Australia.
“Our intention, as we realised in the last cycles, is that we want to be there at the beginning and (layer) in contracts as the price starts to move,” he said.
“Those contracts will deliver different pricing mechanisms … different durations, such that we can protect against the downside but take advantage of that market upturn.”