Kristie Batten: Uranium believers get rare ‘second chance’

A lull in uranium prices offers a rare second chance to ride the nuclear bull market, with plenty of money to be made, investors have been told.

Missed the first uranium wave of the year? Don't worry, another one is on the way, says Shaw and Partners. Picture: iStock

One of Australia’s top mining journalists, Kristie Batten, writes for Stockhead every week in her regular column placing a watchful eye on the movers and shakers of the small cap resources scene.

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Sentiment in the uranium space seems to be turning positive once again but there is still a chance to snap up a few bargains in the sector.

The price of uranium has been ticking up.

READ: Barry FitzGerald: Garimpeiro sees uranium explorers with potential as prices tick up again

The spot uranium price peaked for the year at above $US100 per pound in early January, sending share prices of uranium stocks surging.

“Really, since April, we've been in the doldrums, which is interesting,” Shaw and Partners head of research Andrew Hines said during the firm’s virtual uranium conference earlier this month.

“I don't think I've seen an equity sector or commodity sector where the sector fundamentals have never looked better, and there's just a big disconnect between the equity price performances and what's going on behind the scenes.”

Hines said demand from the nuclear sector was growing and there was limited new supply coming online.

“There's going to be a lot of investment opportunities for investors to make money in this sector,” he said.

“It's a little bit frustrating with the price pullback, but it's not often you get a second chance at this, so for those who missed the first wave last year, don't miss the second wave that's coming.”

Small caps seeing increased interest

US-focused GTI Energy (ASX:GTR) is at the smaller end of the scale when it comes to uranium names, having a market capitalisation of just $12 million, but executive director and CEO Bruce Lane told Stockhead the company was seeing increased interest in its story.

“It seems to be driven at least partly by the improving awareness of the demand for nuclear power in the US,” he said.

“This increased demand is coming from the general ‘electrification of everything’ trend but also particularly from the data centre hyper-scalers, or the ‘magnificent seven’.”

The magnificent seven refers to tech stocks Apple, Tesla, Alphabet, Amazon, Nvidia, Meta Platforms and Microsoft, the latter of which signed a deal last month with Constellation Energy to purchase energy from the soon-to-be-restarted Three Mile Island nuclear plant in Pennsylvania.

Lane said nuclear energy was being touted as critical to supporting the artificial intelligence boom.

“There is also a growing understanding that in addition to a real shortage of electricity in the US, there is also a real shortage of uranium in the US, especially now that Russian uranium imports to the US are officially banned, Chinese uranium products are added to the increased import tariff list and product from the world’s largest uranium miner, Kazatomprom, is now increasingly heading to China and Russia,” he said.

“These things have greatly exaggerated the already tight global uranium supply shortage with primary mine supply of circa 140 million pounds per annum lagging global and fast-growing annual demand of over 180Mlb to fuel the world’s nuclear reactors, with the US using around 50Mlb of that.”

Last month, the US Department of Energy published its updated Pathway to Commercial Liftoff: Advanced Nuclear report, which Lane said helped investors understand the opportunity.

“The report calls for a tripling of nuclear power, which in turn requires a tripling of uranium requirements, and this has put the spotlight on potential for US domestic uranium producers,” he said, noting that the US formerly produced around 44Mlbpa in the 1980s but currently only produced a few thousand pounds each year.

“This is changing, however, with in-situ recovery miners in Texas and Wyoming back in business and ramping up due to the improved long term contract uranium price now reported at over $US80/lb.”

M&A action

Also giving GTI a boost is recent corporate action close to the company’s ground.

Three weeks ago, New York-listed Uranium Energy Corp announced the acquisition of Rio Tinto’s Wyoming uranium assets for US$175 million.

The acquisition includes the Sweetwater plant, where UEC has plans to build a third uranium production hub.

“The combined property package of UEC and Rio surrounds GTI’s assets in that area, which is only a short distance from GTI’s lead ISR uranium project, Lo Herma, in Wyoming’s Powder River Basin near where UEC is currently producing,” Lane said.

Lo Herma has an inferred resource of 5.71Mlbs grading 630 parts per million uranium oxide and an exploration target of 5.87-10.26Mlbs at 500-700ppm.

“Investors are starting to realise that there are only a handful of companies with compliant resources in Wyoming, the premier production state in the US, and that GTI is the only junior with ISR uranium resources amongst seven permitted ISR plants in the state,” Lane said.

The final phase of GTI’s 2024 drilling campaign is set to begin later this month to construct groundwater monitoring wells.

Following that, the company will update the Lo Herma resource estimate and exploration target before the end of the year.

GTI is then aiming to begin a scoping study to illustrate the economic potential of the project.

At Stockhead, we tell it like it is. While GTI Energy is a Stockhead advertiser, it did not sponsor this article.