{"id":8298,"date":"2024-04-14T19:00:54","date_gmt":"2024-04-14T19:00:54","guid":{"rendered":"https:\/\/economicherald.net\/?p=8298"},"modified":"2024-04-14T19:00:54","modified_gmt":"2024-04-14T19:00:54","slug":"we-cannot-stress-enough-the-fragility-of-supply-canaccord-says-these-uranium-stocks-have-another-20-to-run","status":"publish","type":"post","link":"https:\/\/economicherald.net\/?p=8298","title":{"rendered":"\u2018We cannot stress enough the fragility of supply\u2019: Canaccord says these uranium stocks have another +20% to run"},"content":{"rendered":"

Canaccord Genuity says the structural uranium supply deficit which triggered a +200% spot price run has not gone away
\n\u2018Fragile\u2019 mine supply will struggle to meet demand and difficult pounds will need to be developed: CG
\nOver 5 new 30Mlbpa projects need to come online over next 20 years to meet demand
\nSpot prices to trend higher over 2024; CG models an average price of US$105\/1b (+15% vs. previous)
\nCG\u2019s top uranium picks: NexGen, enCore, Paladin, Lotus, Kazatomprom, SPUT<\/p>\n

\u00a0<\/p>\n

The uranium spot price is taking a breather in the high US$80s a pound, following a scorching run through the psychologically important $100\/lb mark in late 2023, early 2024.<\/p>\n

The equities trade has also died off somewhat alongside prices, and perhaps as shinier prospects, like gold, take centre stage.<\/p>\n

Still, Canaccord Genuity says the structural supply deficit which triggered this long-awaited, +200% spot price run in the first place \u2013 from US$28\/lb in August 2021 to US$88\/lb currently \u2014 has not gone away.<\/p>\n

Spot uranium price over the past 5 years. Source: Tradingeconomics<\/p>\n

Nuclear power, seen as critical to global decarbonisation, is becoming mainstream again. Conservatively, CG expects capacity to expand at a compound annual growth rate of ~3.5% to 2035, versus 3.2% previously.<\/p>\n

More power plants = increased uranium demand, which supply will struggle to meet. Here\u2019s why.<\/p>\n

\u00a0<\/p>\n

\u00a0Supply is \u2018fragile\u2019<\/h2>\n

It is difficult to bring additional mine supply online at the best of times (an average of +10 years from discovery to production, the experts reckon).<\/p>\n

As it turns out, it\u2019s also difficult for current miners to hit production targets.<\/p>\n

\u201cWe cannot stress enough the fragility of primary mine supply,\u201d CG says.<\/p>\n

\u201cThis has become particularly clear in the past 12 months, which have been marked by several production downgrades from incumbent producers (Kazatomprom (LSE:KAP)<\/strong> and Cameco (NYSE: CCJ)<\/strong>).<\/p>\n

\u201cThe most notable downgrade was KAP\u2019s FY24 guide in early February, where it announced a 9Mlb downgrade due to acid supply constraints and delays at some of its newly developed deposits.<\/p>\n

9Mlbs a year is a lot; <\/em>about ~6% of global production.<\/em><\/p>\n

For context, fledgling producer Boss (ASX:BOE)<\/a> will produce an initial 2.45Mlbs a year, while Paladin (ASX:PDN)<\/a> is looking at peak production of 6Mlbs from the Langer Heinrich mine.<\/p>\n

\u201cWe will be closely watching for a revision to KAP\u2019s 2025 production target in August as the company has already flagged its 2025 target of 81Mlbs as \u2018at risk\u2019; we expect a material downgrade,\u201d CG says.<\/p>\n

Even mine restarts in 2024 \u2013 which CG expects to push supply up ~7% to 150Mlbs per annum \u2013 won\u2019t be enough to balance the market. CG estimates a structural deficit of 22mlbs in 2024 and 16mlbs in 2025.<\/p>\n

\u201c\u2019Difficult pounds will need to be developed,\u201d it says.<\/p>\n

But the only greenfields (new) projects currently under construction are KAP\u2019s Budenovskoye and Global Atomic Corp\u2019s (TSX:GLO)<\/strong> Dasa<\/a>, CG says, both of which are facing delays.<\/p>\n

\u201cOther notable projects are still several years away from production when considering hurdles such permitting and financing.\u201d<\/p>\n

The biggest greenfields project on the horizon is Nexgen Energy\u2019s (NYSE, TSX:NXE; ASX:NXG)<\/a> large, high-grade Rook I operation in Canada\u2019s Athabasca Basin, one of the world\u2019s top uranium jurisdictions.<\/p>\n

NXE is also a favourite of Argonaut\u2019s fund manager extraordinaire David Franklyn<\/a> and many other professional stock pickers.<\/p>\n

Rook I \u2013 which Terra Capital\u2019s Jeremy Bond calls<\/strong> \u201ca geological freak\u201d\u2013<\/a> will be the largest and lowest cost uranium mine in the world, pumping out 30Mlbs a year.<\/p>\n

Rook I will cost CAD$1.3bn to build, but because of it\u2019s high margins the payback period is expected to be only ~0.6 years \u2014 and that\u2019s at US$50\/lb.<\/p>\n

At a US$100\/lb uranium price, NXE could be making a monstrous $3.4bn CAD each year<\/em> in EBITDA.<\/p>\n

But even this won\u2019t be enough to touch the supply deficit, says the company, which requires \u201cover 5 new Rook I sized projects to be found, permitted, financed and constructed over the next 20 years\u201d.<\/p>\n

Demand for uranium is expected to rise by 127% by 2030 and 200% by 2040. Source: NexGen Energy<\/p>\n

\u00a0<\/p>\n

Spot prices, uranium stocks to head higher in 2024<\/h2>\n

Given extreme tightness in the spot market, CG \u201ccontinues to believe that spot prices could trend higher over 2024 and model an average price of US$105\/1b (+15% vs. previous)\u201d.<\/p>\n

\u201cA re-evaluation of the cost curve has also driven us to increase our Iong term price assumption to US$90\/lb, from US$75\/lb-$80\/lb previously.\u201d<\/p>\n

This mean CG\u2019s favoured uranium equities have price targets that are, on average, 13% higher.<\/p>\n

\u201cOur preferred equity exposures are NexGen Energy and EU in North America; Paladin and Lotus (ASX:LOT)<\/a> in Australia; and KAP in the UK,\u201d it says.<\/p>\n

\u201cFor pure spot price exposure, we like U.UN (SPUT) and YCA.\u201d<\/p>\n

\u00a0<\/p>\n

Cannacord\u2019s Top Picks on the ASX<\/h2>\n\n

<\/span>\u00a0
\n<\/span><\/p>\n

The post \u2018We cannot stress enough the fragility of supply\u2019: Canaccord says these uranium stocks have another +20% to run<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"

Canaccord Genuity says the structural uranium supply deficit which triggered a +200% spot price run has not gone away \u2018Fragile\u2019 mine supply will struggle to [more…]<\/a><\/p>\n","protected":false},"author":0,"featured_media":8299,"comment_status":"","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-8298","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance"],"yoast_head":"\n\u2018We cannot stress enough the fragility of supply\u2019: Canaccord says these uranium stocks have another +20% to run - Economic Herald<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/economicherald.net\/?p=8298\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"\u2018We cannot stress enough the fragility of supply\u2019: Canaccord says these uranium stocks have another +20% to run - 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