At US$65.50 a pound, uranium has sailed past the US$64/lb reached in early 2020 during the first days of the war in Ukraine and is on track to clear the US$70/lb mark last reached in 2011, just before the Fukushima nuclear reactor meltdown in Japan.
Somewhere in the future is the all-time peak of US$140/lb reached in 2007, but for a return to that level there will need to be a global energy rush which cannot be ruled out if over-promoted renewables such as wind and solar continue to fall short of their promise and interest in small nuclear reactors continues to grow.
Speculative trading by investment funds started the new uranium boom with a “buy and hold” approach which removed material from the market, but the new force is buying by power station operators replenishing inventory.
The entry of electricity utilities points to uranium entering a period of a sustainably high price which should ensure ongoing investor interest in near-term producers such as Boss Energy and Paladin Energy, along with explorers which have their foot on advanced projects.
Boss added 12c this week to $4.47 though that seemingly modest rise needs to be seen against an increase of $1.19 (37%) over the past month as the uranium story gained traction and $2.45 (120%) since the start of the year.
Paladin has followed a similar pattern with a 3c rise this week to 98c, a modest performance compared with the 19c (24%) increase over the past month and 32c (49%) increase since the start of the year.
Boss and Paladin are being rewarded for moving ahead of the market with their project development plans, Boss at the Honeymoon mine in South Australia and Paladin at the Langer Heinrich mine in Namibia.
Uranium-exposed companies further away from production or still in the exploration phase did not perform as well as the near-term producers, a sign that investors remain cautious about future funding requirements as interest rates remain high and look like staying there for a while.
Deep Yellow, which has three promising projects on its books, could manage only a 1c rise this week to $1.08 though the gain since the start of the year is 39c (56%). Bannermen fell 12c this week to $2.48 (but is up 85c or 51% this year) and Alligator Energy lost 1.3c this week to 5.3c (but is up 1.3c or 32% this year).
Deep Yellow, a London-listed buy-and-hold fund with Australian connections, is almost perfectly reflecting the underlying price or uranium, adding 32-pence (6%) this week to £5.35, taking its rise for the year to £1.52 (40%).
Uranium stocks were clear leader on the Australian market this week with the overall trend down after an overnight warning that the U.S. central bank could resume interest rate rises next year if inflation is too high.
The all-ordinaries index fell by 2.6% over the week, taking it back to where it was a month ago. The metals and mining index did better, down just 0.5% while the gold index moved modestly against the outgoing tide to add 1.5% despite a flat gold price.
Central bank activity remains a critical factor in the market (along with China’s sluggish rate of growth) and even with the U.S. Federal Reserve not increasing rates at this week the market took a negative turn because the highest rates for 22 years look like sticking around for a while.
A reading of the “dot plot” which acts as a guide to future rate moves pointed to one more increase of 0.25% in the current cycle but with an ominous forecast that rate cuts will be slow next year and last well into 2025.
The promise of a slow-motion decline in rates was a factor in the gold market where the price jumped to US$1946 an ounce ahead of the Fed meeting before sagging back to US$1926/oz, a gain of US$3/oz but weakening.
What could put a fire under gold when interest rates finally begin their descent was a midweek report that total global debt has reached an all-time high of US307 trillion, up US$10 trillion in the last six months.
Lithium, the market star until uranium reclaimed the commodity world’s top spot, struggled this week as the price of the metal declined, doubt grew about the pace of electric vehicle sales, and politicians started to wind back policies aimed at driving internal combustion engines (ICE) out of the market.
British Prime Minister, Rishi Sunak, is leading the roll-back of overly strict environmental targets saying that the ban on the sale of new ICE vehicles would be pushed out by five years to 2035, a move which followed reports of stalling EV sales as consumers wilt under cost-of-living pressures.
Leading lithium stocks were hit by ongoing weakness in the metal which is down 18% over the past month and while producers such as Pilbara Minerals and Allkem remain handsomely profitable, it’s the trend which worries investors. Pilbara led the way down this week with a fall of 50c to $3.99. Allkem lost $1.40 to $11.53.
Lithium explorers and emerging producers were also hit in the sell-off. Global lost 5.5c to $1.46. Core was down 4.5c to 35c, Delta slipped 2.5c lower to 90c and Patriot Battery Metals shed 17c to $1.28.
Azure Minerals, a star performer for much of the past 12-months, ran out of puff, slipping 8c lower to $2.57 even as Bell Potter refreshed a buy tip and unchanged price target of $4.50.
Wildcat Resources, which made a midweek splash with news of a significant lithium discovery at Tabba Tabba in the north of WA, ended the week up 1c at 40c – but is up 14c over the past month.
Rare earth stocks were also sideswiped by heavy selling with Meteoric Resources an exception as interest grows in its Caldeira prospect in Brazil, which helped lift the stock by 2c to 24c. Macquarie Bank is tipping that the stock will rise to 45c.
Codrus also managed a price increase with a rise to 2c to 9.2c after reporting encouraging drill results from the Kaloning prospect in WA. Lynas, the rare earth leader, lost 67c to $6.82 despite a Macquarie buy tip and price target of $7.70.
Explorers and emerging gold producers did reasonably well during the week, led by Red 5, which added 5c to 26c after Silver Lake launched a raid, snapping up an 11% stake in the target, which could be the next domino to fall in the consolidation of WA’s Leonora gold region. Silver Lake went the way of many bidders, losing 7c to 90c.
Astral was another small stock to gain ground with a rise of 1c to 7.9c after reporting encouraging assays from the latest drilling at its Feysville project near Kalgoorlie in WA, while Bellevue continued to attract buyers, rising by 4c to $1.50.
Gold leaders were generally sold down as talk of long-term high interest rates rattled confidence. Northern Star lost 49c to $10.94 and Evolution was 21c weaker at $3.58.
Other news and market moves of interest included:
- Australian Gold and Copper rose by 1.6c to 7.3c after a Chinese company injected $10 million into the explorer which is active in the Cobar region of NSW.
- Perseus Mining lost 6c to $1.72 after announcing plans to extend the life of the Yaoure mine in Ivory Coast.
- AIC Mines added 1c to 33c after reporting high grade copper intersections from the latest drilling at its Jericho North project in Queensland.
- Whitehaven Coal rose by 12c to $6.70 as interest grows in its possible acquisition of metallurgical coal mines in Queensland being sold by BHP.
- New Hope slipped 15c lower to $6.05 despite strong coal sales, but could go lower if Macquarie Bank is right with a sell tip and price target of $4.20, and
- Maronan Metals rose by 3c to 23c after reporting high grade silver assays from drilling at its namesake project near Cloncurry in Queensland with a best hit of 21.15 metres at 329 grams of silver equivalent per tonne, a number which includes lead in the core.