Publisher's Note: Today, we're bringing you part two of the interview our junior mining expert and editor of Junior Mining Monthly and Junior Mining Trader, Gerardo Del Real, recently landed with president and CEO of Skyharbour Resources (TSX-V: SYH)(OTC: SYHBF), Mr. Jordan Trimble.
If you missed it, part one may be found here.
Read on to get an insider's perspective on what it will take to push uranium into an all-out bull market.
To your wealth,
Nick HodgePublisher, Outsider Club
Gerardo Del Real: Jordan, I have to get your take on the overall uranium space, the multiple catalysts that you see on the horizon, and what we really need to happen before we can truly say that we are in an all-out, full-blown uranium bull market, one that I think is on the way, and that I think we're, frankly, at the early stages of, but I'd love to get your take.
Jordan Trimble: Look, we could sit here for hours talking about it, but I'll be as succinct as possible. We all know that the current price, the current spot price at $23-$24 a pound is unsustainably low. It's well below the average global cost of production, mines producing today, which is about $41-$42 a pound, and well under the price needed to incentivize any new, meaningful production to come online at current development projects. That price, around $55 to $60. $60 a pound, so almost triple from where it is currently in the spot market, is the average analyst-projected or forecasted price, long-term price for the commodity, and as we saw back 10 years ago, 2006, 2007, we saw the price spike up to over $135 a pound.
Now, will we see that again? I don't know, but I can tell you in no uncertain terms that the current price is way too low. It's one thing for the price to be low. It's another thing to finally start seeing some catalysts that could turn the market around, that can change that. And in the last, and particularly in the last three or four months, there's been some notable headlines and positive developments.
We've seen a lot of production cuts over the last year and a half between the largest producer globally, which is Kazatomprom out of Kazakhstan. Think about that. Kazakhstan produces over 40% of global primary mine supply of uranium. I mean, if you compare that to oil, for example, it's Saudi Arabia plus the U.S. plus other larger producers, so over 40% comes from Kazakhstan alone, Kazatomprom being the state-run uranium mining company there. They've announced major production cuts.
And it's not just production cuts at mines that have been operating for a long period of time. These are mines that came into production about 10, 12 years ago. They're ISR. There's talk about declining production rates, potentially, at this point, but these are some of the lowest-cost producing mines in the world, so these aren't mines that are shutting down that are high cost that are low grade. These are some of the best, lowest-cost mines in the world that are curtailing production.
So we've seen Kazakhstan announce major cuts, and actually just recently announced more. We now move on to Cameco, the world's largest publicly traded uranium company, based here in Canada. They shut down, back in February, the world's largest and highest-grade uranium mine in McArthur River. Again, I emphasize these are low-cost mines. These are not at the high end of the cost curve. Here we have the low, like the bottom quartile of the cost curve that's shutting down.
When we see that happening coupled with existing mines, operating mines that are simply running out of reserves and resources, and other mines that are still producing but the producer is able to sell into a long-term contract at a much higher price, because a lot of uranium is traded on these long-term contracts, which were priced at much higher prices back in the last bull market, as those contracts roll off, they don't have that price protection. They, too, will be forced to shut down.
To put some numbers on that, the annual demand projected for 2018 will be over 190 million pounds in the global nuclear reactor fleet. We are now going to be producing less than 135 million pounds of uranium, down from about 160, 165 million pounds a couple of years ago. That is a massive, massive cut, and I think you will see more cuts coming.