Mar 31 Uranium Week: Prices Surge On Mine Shutdowns

Weekly Reports |Mar 31 2020

The spot uranium price leapt 13% last week as around the globe miners announced temporary shutdowns for the sake of worker safety.

-Cameco shuts up shop-Other uranium miners/developers follow suit-Worker safety paramount

By Greg Peel

On a directive from the Canadian and Saskatchewan governments, Cameco last week shut down its 50% owned Cigar Lake uranium mine - the world's largest operating mine.

While no cases of the virus have been reported at Cigar Lake, the potential risk to local remote communities from a large fly-in, fly-out workforce was considered too great.

The mine will be put into care & maintenance for an initial four weeks, at which point the situation will be reassessed.

In order to satisfy delivery contracts, Cameco will purchase lost production in the spot market.

Last week saw a surge in uranium spot market activity as a result, with 4mlbs U3O8 equivalent changing hands, industry consultant TradeTech reports. TradeTech's weekly spot price indicator leapt US$3.05, or 13%, to US$27.00/lb.

While there was some utility buying amidst the spree last week, traders and producers were the main protagonists, TradeTech reports.

Term markets also saw price rises as delivery contracts were settled, although TradeTech's term price indicators remain at US$28.25/lb (mid) and US$33.00/lb (long).

Widespread

Cameco has been buying uranium in the spot market for a couple of years, since shuttering its McArthur River mine and Key Lake mill, also in Saskatchewan, due to low uranium prices.

Producer buying has at best underpinned uranium prices in that time, with a lack of utility buying leading to little upward movement. Many a mine across the globe has been placed in care & maintenance.

But while low prices were behind those closures, the virus has now sparked another round. Cameco is not alone.

In Namibia, the Rossing mine, now owned by China's CNNC, will enter a period of "minimal mining operations".

Kazakhstan's Kazatomprom had the week before issued a warning that the virus presented a risk to its remote sites, and now the Kazak government has locked down nearby cities, strongly advising workers to stay at home.

BHP Group's ((BHP)) massive Olympic Dam mine in South Australia is "polymetallic", with copper the leading product, and uranium a significant by-product. BHP has implemented measures across its operation to reduce virus risk.

Canada's Denison Mines has announced a temporary suspension of activities related to the environmental assessment for its Wheeler River uranium project in Saskatchewan.

Uranium Energy Corp has postponed plans to resume drilling at its Burke Hollow project in Texas.

More Upside?

Canaccord Genuity understands that after under-purchasing over the last five years, US utilities are now approaching less than three years of feed requirements held in inventory, with over 50% of supply to be re-contracted by 2023.

Any further supply disruptions could potentially hasten sales contract negotiations with advanced developers.

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