Welcome to Ten-Bagger, where Lowell Resources Fund chief investment officer John Forwood gives us his take on a sector of the ASX resources market full of value.<\/p>\n
This month, John tells us why uranium stocks are back on the winner\u2019s list.<\/strong><\/p>\n Niger and Kazakhstan are two countries with few similarities. Except, they\u2019re both big uranium producers and erratic government policies from each of the (largely) autocratic regimes have provided tailwinds for yellowcake producers elsewhere.<\/p>\n The African nation\u2019s takeover by a military junta last year has stirred concerns about major nuclear power market France\u2019s ability to feed its reactors with a nationalistic stance that included last month the effective expropriation of an undeveloped project held by the European nation\u2019s uranium miner Orano.<\/p>\n Niger is the second largest of France\u2019s uranium suppliers after Kazakhstan, ahead of Namibia, Uzbekistan and Australia, but Orano\u2019s activities in the country are unpopular with a government tapping into sentiment against the presence of the former colonial power in its political landscape.<\/p>\n Earlier this month, the Niger junta also revoked GoviEx Uranium\u2019s rights over the perimeter of the Madaouela mining permit. TSX.v-listed GoviEx has done an enormous 650,000m of drilling to define one of the world\u2019s largest uranium mineral resources.<\/p>\n Yet the real rocket for uranium stocks came when Kazakhstan\u2019s government last week delivered a surprise tax hike on uranium producers.<\/p>\n Producers in the country, which generates around 43% of the world\u2019s U3O8 supplies, currently pay a 6% royalty on their output.<\/p>\n That will rise to 9% in 2025. But that\u2019s not all. From 2026, the rate will become tiered in a similar vein to Queensland\u2019s cash cow coal royalty system. Mines producing less than 500t will cop a rate of just 4%, but those producing upwards of 4000t will send 18% of revenue to the State, with a staggered list of tiers in between.<\/p>\n An additional tax of up to 2.5% could be paid if the weighted average price of sales from the mine exceed US$110\/lb.<\/p>\n Pic: Kazatomprom<\/p>\n Lowell Resources Fund (ASX:LRT)<\/strong><\/a> CIO and Ten Bagger expert John Forwood told Stockhead\u00a0<\/em>that could curb output further from an already underperforming Kazatomprom, Kazakhstan\u2019s state producer and the largest exporter of yellowcake globally, and push prices higher amid a shortage of the nuclear fuel.<\/p>\n \u201cIt\u2019s a disincentive. You\u2019ve got Kazatomprom, where everyone is questioning whether they\u2019ll actually be able to meet their production targets \u2013 they\u2019re having construction issues, and they\u2019re also having issues in sourcing sulphuric acid,\u201d Forwood said. \u201cIt seems highly unlikely that they\u2019ll be able to produce the maximum that they\u2019re allowed to.<\/p>\n \u201cWhat is the OPEC of uranium, Kazakhstan, has got two significant headwinds in terms of increasing production. And so that just plays more into the hands of the Western producers and developers.\u201d<\/p>\n \u00a0<\/p>\n While uranium spot prices have fallen from a 16-year-high of US$107\/lb in January to around US$86\/lb at the end of last week, contract prices, ceilings and floors are catching up to the more constrained spot market.<\/p>\n Although uranium stocks already enjoyed their initial bull run in last year\u2019s market surge, spurred by increased demand from utilities who contracted uranium oxide from miners at a decade high of 160Mlb, Forwood said long lead times to getting projects into production would likely see deficits swell.<\/p>\n \u201cIn the West, we know that it takes twice as long to bring a new uranium mine into production as it does for the Chinese to build a new nuclear reactor, and that\u2019s where the lion\u2019s share of the new nuclear reactors are being built,\u201d he said.<\/p>\n \u201cThe squeeze is on. And these moves in Niger and Kazakhstan will exacerbate the squeeze.<\/p>\n \u201cThe uranium explorers do seem to very much trade on the spot price, although spot is really a very small amount of the 180Mlb of uranium that is used every year. Most of it is under a term or contract price..<\/p>\n \u201cI would expect that these factors will start flowing through pretty quickly to new contracts. I would expect that for utilities, this makes them even more nervous.\u201d<\/p>\n The American push to displace Russian-sourced enriched uranium will also help Western producers, Forwood said, with the US Department of Energy setting up a fund to procure locally enriched uranium for US utilities following the sign off of bipartisan legislation to eventually ban Russian enriched uranium sales in the States.<\/p>\n \u201cNow we\u2019re hearing US$70-75\/lb term contracts as the level being negotiated and I wouldn\u2019t be surprised to see that gap between spot and term start to narrow or for both to go up together,\u201d he said.<\/p>\n \u00a0<\/p>\n Forwood is an avid tracker of uranium explorers with the potential to make a big new discovery.<\/p>\n His two this month are both in Canada.<\/p>\n One is $28 million capped Infini Resources (ASX:I88)<\/strong><\/a>, which is up over 350% in the past month after reporting soil samples at the Portland Creek project so rich in uranium they fell outside the detection limits of conventional testing technology.<\/p>\n While they remain no substitute for drill samples, a swag of samples returned from the Portland Creek project in Newfoundland have set yellow hearts a flutter.<\/p>\n Seven of the 17 samples from a 235m x 100m zone coinciding with a historic radon gas anomaly returned assays of more than 3% U3O8 using stronger assay tech.<\/p>\n The best came in at 74,997ppm U3O8, or 7.5%, the kind of concentrations normally only seen in Saskatchewan\u2019s freakish Athabasca Basin.<\/p>\n \u201cIt\u2019s not a geology which is widely known as being prospective for uranium,\u201d Forwood said.<\/p>\n \u201cCanada is host to the highest grade uranium projects in the world in the Athabasca basin.<\/p>\n \u201cSo I think explorers in the Athabasca and possibly eastern Canada as well have some really good potential.\u201d<\/p>\n Forwood is also tracking the northern Athabasca explorer Aero Energy (TSX-V:AERO),\u00a0<\/strong>which is searching in an under-appreciated area of the famous uranium district, home to the vaunted Cigar Lake, Rabbit Lake, McArthur River and Arrow uranium deposits.<\/p>\n \u201cThe closest town to their project is called Uranium City, which is quite a good sign,\u201d Forwood said.<\/p>\n \u201cThey\u2019ve got numerous high grade rock chips at surface.<\/p>\n \u201cThey\u2019re on the edge of the Athabasca, so they\u2019re not under hundreds of metres of sandstone, which (often) presents problems in terms of both exploration and mine development.<\/p>\n \u201cIt\u2019s shallow cover and outcrop and like many at the Athabasca explorers they\u2019ve got a drilling program underway at the moment.\u201d<\/p>\n \u00a0<\/p>\n\n \ufeff<\/span><\/span>\u00a0<\/p>\n The post Ten Bagger: John Forwood says Kazakh tax rules have uranium explorers back on song<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"Renewed interest in yellowcake stocks<\/strong><\/h2>\n
Take me down to Uranium City<\/h2>\n