The following article will be used in the case study and the individual test. Make sure you read this article (carefully) when preparing for the case study.

Uranium price breaches US$60 a pound as demand outstrips supplyBy Tim Treadgold, September 7, 2023

It's getting harder by the day to ignore the uranium revival as the price breaches the US$60 level with stockpiles shrinking and demand comfortably outstripping supply.

If it was any other commodity the price would almost certainly be a lot higher as would the share prices of the small band of Australian mining companies prepared to go where few have gone in the past 50 years.

Uranium, however, is a special case. Not just because it can be used in massively destructive nuclear weapons but also for its boom/bust history which first seduces investors and then slams the door on them.

Role of history and decarbonization

History could repeat the bruising sell-offs which followed nuclear accidents at Three Mile Island in the US, Chernobyl in Ukraine and Fukushima in Japan, though this time around there is a new factor offsetting the negatives; decarbonisation.

Limiting emissions of carbon dioxide, the gas wearing most of the blame for climate change, has restored interest (and investment) in nuclear power.

While some Australian politicians and environmental activists are stuck in the past the rest of the world is moving on. Advantages of nuclear energy

Nuclear, whatever its faults, has reclaimed a role as an important source of low-pollution, base-load power of the sort needed to drive a modern economy - doing what wind and solar can't do; churn out electricity 24/7 for 365 days a year - for decades.

Global demand for electricity is rising so quickly that power utilities which once proposed to shut reactors are now planning to build more.

This is a shift which has seen them return to the long-term contracting market to compete with investment funds which have been at the forefront of a surge in speculative buying of uranium.

Inventory decline and market competition

The return of the utilities is being driven by a steep fall in their inventories which has seen the stockpile of European power companies fall from around 140 million pounds in 2013 to an estimated 90 million pounds today while US utility inventories are down from 125 million pounds in 2016 to around 101 million pounds.

The fall is a direct result of the power companies burning more fuel than they have been buying with top up time forcing them back into a tightening market where they are being forced to compete with fund buying.

ASX uranium leaders

Locally, the two leaders of the Australian uranium industry are Boss Energy (ASX: BOE) which owns the Honeymoon project in South Australia, and Paladin Energy (ASX: PDN) which owns the Langer Heinrich mine in Namibia.

Both Boss and Paladin are making rapid progress with the redevelopment of their old projects which means they are within sight of making the jump out of the ranks of explorer/developers into the rare category of Australian uranium producer.

Both have also moved well beyond the description of small cap stocks.

Boss, which was trading at less than 10c as recently as three years ago is now selling for around $4.13, a price aided by a one-for-eight share split but which still leaves the company valued at $1.46 billion.

Paladin, a star in the 2007 uranium boom when its shares almost reached $10, before collapsing to 4c in 2020, has been recapitalised and at 94c is valued on the market at $2.8 billion with Bell Potter tipping that the stock will rise to $1.12.

(Source: https://smallcaps.com.au/uranium-price-breaches-us60-pound-demand-outstrips-supply/)