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ASX juniors flock to US riding early uranium wave amid pandemic supply shock

ASX-listed juniors are jumping into the U.S. uranium space, riding the belief that a deferential federal government and a supply shock worsened by COVID-19 will better position them in the long run for what many now believe could be a prolonged uranium deficit.

The companies venturing into the U.S. have largely focused on prospects for future uranium production, acquiring mining claims or projects with exploration and development history. U.S. President Donald Trump's effort to secure a domestic nuclear fuel supply chain as well as a uranium price spike prompted by the coronavirus pandemic form part of the rationale for coming stateside.

In many cases, the companies' stocks have rocketed on news of their activities, serving as a potential indicator of the excitement surrounding uranium equities.

"When you look at all the other commodities — copper, iron ore, oil the only [one] that looks interesting is uranium," Nuclear Fuel Associates managing principal Dustin Garrow said, adding that "investor interest will continue to rise as long as they continue to perceive the market as being in a strengthening phase."

"With cutbacks on economic activity, they're all getting punched in the nose; whereas uranium, because it was already in a difficult situation, shows pretty good potential for the price to go up, Garrow said.

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The ASX share price of Superior Lake Resources Ltd. doubled in early June when the company entered into a three-month exclusivity period with Aurora Uranium Ltd. to conduct due diligence on the Aurora uranium project in Oregon. About A$20 million has been spent on exploration and development at Aurora since discovery in the 1970s, and uranium resources are estimated at 37.9 million pounds.

Superior Lake's stock shot up another 30% upon securing a three-month exclusive option to conduct due diligence on Premier Uranium LLC about a week after Superior Lake announced the Aurora deal. Premier Uranium owns the Sweetwater in situ recovery project in Wyoming near Rio Tinto's uranium mill of the same name, which has a U.S. Nuclear Regulatory Commission source materials license but has not operated since the early 1980s.

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Superior Lake Resources
Executive Director Grant Davey.
Source: Superior Lake Resources

Superior Lake Executive Director Grant Davey told S&P Global Market Intelligence that due to its various trade wars, the U.S. cannot keep relying on other countries for uranium to feed the 95 reactors that generate 25% of its energy. The U.S. is one of the top uranium users in the world and sources 2% of its uranium domestically.

TNT Mines Ltd. agreed to acquire the East Canyon project in Utah in May, and GTI Resources Ltd. announced a uranium exploration program in Utah in April, subsequent to which both companies said the Trump administration's favorable position toward uranium provided momentum as their stock prices lifted.

A TNT Mines spokesperson said in a June 25 email that Trump's policies were "an additional tailwind that may aid our endeavors" but were "not necessarily critical" to the company's success.

Mike Alkin, chief investment officer of New York uranium and nuclear power-dedicated hedge fund Sachem Cove Partners, said in a June 25 interview that the long-term uranium supply deficit is approaching a point where companies that are in a position to produce material within five years will do "very well." Sachem Cove Partners owns Premier Uranium LLC.

"People think the United States is just begging for dollars from Uncle Sam ... and we think there are opportunities in the United States that are not the lowest cost producer, but at a price of uranium in the US$55 per pound range ... if you are at the position over the next several years to produce uranium, you're going to make money, and you're going to be able to produce because there will be a deficit for many years," Alkin said.

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S&P Global Platts assessed the 12-month average of uranium spot prices, based on the mean of assessed activity for U3O8 delivered over the next 12 months, at $32.99/lb as of June 29. The price has risen by $8.47 per pound, or 35%, since March 23 when Cameco Corp. first announced it would shut its Cigar Lake mine indefinitely due to the coronavirus pandemic.

Guy Keller, portfolio manager for Tribeca Investment Partners Pty. Ltd.'s uranium fund, Tribeca Global Natural Resources Ltd., which listed on the ASX in 2018, told Market Intelligence that improving uranium markets and the additional upside of favorable U.S. policy is revealing "a bit of a trend" toward Australian companies acquiring U.S. properties early in the cycle.

Tribeca's preference is to hold an ASX-listed company that has previously produced, such as Peninsula Energy Ltd. and its Lance project in Wyoming, and Tribeca "will be ready to add pounds" into the next cycle upswing, according to Keller.

There is the potential for U.S. uranium companies to view ASX-listed entities as dangerously encroaching on their turf, especially after a long-fought battle for federal assistance. Colorado-based Energy Fuels Inc. is within trucking distance of some of the properties these junior miners recently acquired. The company operates the White Mesa mill, the only fully licensed and operating conventional uranium and vanadium mill in the U.S.

Energy Fuels COO Paul Goranson said in a June 17 email that the impressive market reactions to Australian companies' "sudden interest" in the U.S. could reflect "new transactions that have the appearance or promise of being near-term production," adding that none of them had reached out to Energy Fuels regarding their properties or opportunities to mill their ore "should they start mining."

Goranson said the projects recently acquired have a lot of work ahead before they become viable for production.

S&P Global Platts and S&P Global Market Intelligence are owned by S&P Global Inc.