"We expect a gradually improving uranium market with a conservative long-term contract price of US$60 per pound and a spot price of US$50/lb," Numis Securities' Jonathan Guy said Feb. 6 at the Mining Indaba conference in Cape Town, South Africa.
"We expect demand [for uranium] to continue to grow, driven by China's nuclear build-out and augmented by the progressive restart of Japan, with additional build coming online in Russia, India, South Korea and in the U.K. potentially as well," Guy said as he moderated the panel "Will Uranium Prices Recover in 2019?"
On the supply side, Guy said he expects the situation to improve from a price perspective, noting that JSC National Atomic Co. Kazatomprom's contracted volumes have fallen by about 20% and that Cameco Corp. idled McArthur River, the world's second-largest mine of the nuclear fuel, at the beginning of 2018.
"We do recognize that additional capacity is therefore available to come back online in the event of a price recovery, but we feel that that incentive price has to be considerably higher than spot and contract prices are today," Guy added.
Following Guy's opening remarks, GoviEx Uranium Inc. CEO Daniel Major and Global Atomic Corp. Executive Vice President Merlin Marr-Johnson dwelled on their respective uranium projects in Niger, where both have operated for more than 10 years, praising the landlocked West African nation's mining code and favorable tax regime, and environment more generally, to miners.
Major said GoviEx's Madaouela project in Niger has already gone into final feasibility study, and the company is working with banks to try to bring the project into production with the rising uranium price.
Marr-Johnson noted that a resource upgrade due later this year for Global Atomic's feasibility-stage DASA project will take its current 60 million pounds at 4,500 parts per million, or almost 0.5% uranium, even higher and increase the size of the resource.
"At a cutoff of 200 ppm, we already have over 180 million pounds in indicated and inferred," Marr-Johnson said. "Once the resource is out in Q2, we will be going straight into feasibility study, and one of the options that we will be looking at will be the possibility of a trucking [arrangement], with an agreement that we are in the process of finalizing with Orano SA."
Marr-Johnson said Global Atomic is discussing the option of trucking ore to Orano's mills. If a commercial agreement can be reached, he said, it would "significantly" change the capital expenditure profile of Dasa because it could come into production without the need for a plant.
An arrangement with Orano could give Global Atomic the option of bringing Dasa into production "very quickly and potentially at spot prices today of US$29/lb," Marr-Johnson said.
Marr-Johnson and Major highlighted that many economical uranium mines are approaching the end of their lives.
"We can see the tailing-off of economically viable production, which is why projects like Madaouela and Dasa are so critical for the future of uranium mining," Marr-Johnson said.
Major noted the importance of the permitting time frame. "The standard is going to be six to 10 years, so if you are looking at a supply curve and putting in an estimation of what you think is going to turn up when, that is going to be one of the key parameters and one of the key risks."
On the demand side, Marr-Johnson mentioned the importance of climate change, electrification driven by population growth and China and Japan as demand shifts from the West to the East.
"Nuclear generation is now at the same level it was pre-Fukushima," Major said. "You're at the fastest build rate of reactors that we have seen in the last 25 years, and it is accelerating."
Major added that on the supply side, many projects have closed, and the Kazatomprom and Cameco shutdowns have effectively put the market into deficit. Kazatomprom and Cameco have created a duopoly, he said, comparing Kazatomprom to OPEC. "[Kazatomprom] has a marketmaker in Cameco," which needs a long-term contract price to replace its resources.
"It has been a fairly long and challenging period for uranium; 2018 was better than previous years, and we expect 2019 and 2020 to be better than that," Guy predicted.