Uranium price breaches US$$60$ a pound as demand outstrips supply

By 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$.$

Page $4$ Kaplan Business School Assessment Outline $2023$ T$3$

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 $10$c as recently as three years ago is now selling for around

$$4\mathrm{.}13,$ a price aided by a one$-$for$-$eight share split but which still leaves the company valued at $$1\mathrm{.}46$

billion.

Paladin, a star in the $2007$ uranium boom when its shares almost reached $$10,$ before collapsing to

$4$c in $2020,$ has been recapitalised and at $94$c is valued on the market at $$2\mathrm{.}8$ billion with Bell Potter

tipping that the stock will rise to $$1\mathrm{.}12$