| | | Golden Rock Research:
Do Large Capital Decisions Loom Over These Companies? Uranium supply from Canada is shaping up to be the next major swing factor this cycle. There is no other jurisdiction today that faces so many questions with so few answers. The Athabasca Basin in Saskatchewan, Canada offers high grades and vast pounds, but comes at a very large cost- technically challenging deposits, regulatory hurdles, community relations, labor, time and lots of required capital. The notion that a company will advance a deposit to production is a major, multi-year undertaking that investors should not take lightly.
History has shown us that while the Basin is capable of producing steady uranium supply, few projects ever become mines. As the industry continues its transition to a market-based, production-led one, companies need to strategically plot their way forward ensuring that their decisions ultimately lead to value for shareholders.
Today, many equity investors continue to focus their attention on Kazakhstan and for good reason. They are the elephant in the uranium world. On a 100%-basis, the country produces ~40% of global primary supply with Kazatomprom producing about half of that on an attributable basis. A mere 10% swing in the country’s production is equivalent to ~7M-lbs per year, an amount that can have a reasonably sized impact to the market and an even bigger impact to equity sentiment. But, the major growth story in Kazakhstan is over. Can they produce more in the next couple years ahead? I believe they can, but their production profile has been priced into the uranium market today and for the next several years. Whether they produce 70M-lbs or 80M-lbs doesn’t really matter anymore. In fact, the market is keen to watch if they can continue to keep up these rates and for how long? After all, these are depleting assets and with the Kazakhs on the hunt for more uranium abroad (eg, Mongolia and Jordan), it speaks volumes about what they see ahead, which is, they’ve tapped themselves out. See for yourself…
But, there is a storm brewing on the other side of the globe in the Athabasca Basin. Since the founding of Golden Rock, readers know that I have been drilling down into the supply-side of this industry and when you lay out all the numbers, it is abundantly clear that the market needs to turn its attention to Canada.
For equity investors, it is critical to understand the pace at which this sector moves. There is “real” time and then “uranium” time. Uranium time is different than the 24 hours a day you and I are used to living. In “U-time”, 2035 might as well be Q2 2026. Major capital decisions need to be made very soon if the market wants to see a uranium project advanced and pounds in the can by that date. As a result of these brewing dynamics, uranium investors who get Canada right, or at least directionally, will be way ahead of the crowd and position their portfolio correctly, for both underlying moves in the commodity and the best way(s) to express the view.
In this Deep Dive, I take a look at all the swirling dynamics that are unfolding and my views on what I think will happen. What are the current mines operating now? How much longer is their mine life? Are there any brownfield deposits that can come online? If so, when? What deposits will replace current production by the end of the 2030s? What will Cameco and/or Orano do about M&A? Do they need to do anything? Are there any curve balls that the market might be overlooking today? |
|
