Daniel Major: Uranium Series Part 3: Uranium Clearly on an Upward Trend
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Daniel discusses the latest market conditions and why he sees it on an upward trend. Steady growth continues in nuclear energy production and reactor builds. Uranium producers have been holding back production, and there is a reduction in supply in the secondary market. Many utilities still have inventory, but they are declining as contracts unwind. He says, “There is a lot of factors that will squeeze the price higher.”
From a fundamental perspective, the most significant risk with the uranium market is with the opaque inventory numbers. There is always a chance that coming price increases could bring production online too quickly.
New contracts haven’t been signed in recent years because of continued excess supply from existing contracts. So in that environment, the spot market was able to supply those that did not have contracts.
The U.S. and Europe’s needs for uranium are mostly covered for another year or so, but after that, we see a sharp decline in contract obligations. Inventory levels are starting to drop, and because many users want to maintain a two-year inventory they will want to start looking for that supply soon. Producers, on the other hand, are going to want justifiable long-term prices going forward.
GoviEx, unlike most potential uranium plays already have their permits in place. They are working with banks to establish benchmarks for capital and use that to establish a price at which their project is feasible.
As an industry, they want to secure long-term pricing that can justify the capital investment required to build out. He discusses what you can expect next from GoviEx.