Uranium on the Verge of a Major Supply Crunch

After peaking at $72.50 in 2011, uranium prices plummeted on supply issues that plagued the industry for years to come. However, many uranium producers now believe prices could rise as the market significantly underestimates demand with tightening supply. It’s no wonder then that analysts have high expectations for a uranium industry revival. Several legitimate players include Anfield Energy (TSXV:AEC)(OTC:ANLDF), Cameco Corporation (NYSE:CCJ), Energy Fuels Inc. (TSX:EFR)(NYSE:UUUU), Nexgen Energy Ltd. (NYSE:NXE)(TSX:NXE) and Uranium Energy Corporation (NYSE:UEC).

On the supply-demand issue, investors have taken renewed interest in miners such as Energy Fuel, which operates the White Mesa mill and Anfield Energy, which owns the Shootaring Canyon in Utah and the Irigary ISR (in situ recovery) processing plant in Wyoming.

The Long-Awaited Uranium Recovery

Back in 2011, the world was producing far too much uranium supply, which weighed heavily on prices. Then, as the Fukushima disaster unfolded, it forced Japan to shut down its reactors, releasing even more supply into a spot market filled to the brim. Spot prices responded by sliding from $72.50 to $18 in a few short years. However, in recent years, producers decided to help slow the price decline. Kazatomprom announced that it would reduce production by 20% to better align output with demand. Cameco Corporation even suspended operations at McArthur River the world’s largest uranium mine. Now, as a result of the closures, analysts expect for the bulk of uranium inventory to be burned off by existing, growing demand.

“Those deliberate cuts to production should finally begin to prop up prices as reserves of the rare metal dwindle and nuclear power generators rush to lock-in long-term contracts,” notes sector veteran John Borshoff, as quoted by Reuters. In fact, once utilities see a surplus of demand over supply, “that’s when you will see a dramatic change. The whole issue of fear of lack of supply will start to seep in when they realize they are competing for rare pounds of uranium.” 

We also have to consider that a “decade of declining uranium prices has seen little investment in uranium mining, resulting in a projected supply deficit absent material increases in the uranium price. Even with a material increase in the uranium price, it may take years before new sources of uranium are ready to be mined, due to delays associated with permitting for exploration and development of uranium mines,” notes uranium trader, Yellow Cake.

That’s great news for companies such as Energy Fuels Inc., which operates the White Mesa mill in Utah, which is one of the only fully licensed and operating conventional mills in the U.S. with a capacity of eight million pounds of uranium per year.

Anfield Energy is also likely to benefit from the resurgence of uranium with its Irigaray processing plant and its Shootaring Canyon Mill in Utah.

Anfield Energy has Uranium Supply

A key asset for Anfield's is the Shootaring Canyon Mill in Garfield County, Utah, which is strategically located within one of the historically most prolific uranium production areas in the United States, and is one of only three licensed uranium mills in the United States.

The company also has a Resin Processing Agreement with Uranium One.

This will allow Anfield to process up to 500,000 pounds per year of its mined material at Uranium One's Irigaray processing plant in Wyoming.

Anfield also holds 24 ISR mining projects in the state, located in the Black Hills, Powder River Basin, Great Divide Basin, Laramie Basin, Shirley Basin and Wind River Basin areas. In addition, it entered into an agreement with Cotter Corporation to acquire the Charlie ISR Uranium Project in the Pumpkin Buttes Uranium District in Wyoming. The Charlie Project consists of a 720-acre Wyoming State uranium lease which has been in development since 1969 and sits immediately adjacent to two of Uranium One’s producing mines. 

Potential Comparables

Cameco Corporation (NYSE:CCJ)

The company produces and sells uranium worldwide. The company operates through three segments: Uranium, Fuel Services, and NUKEM. The Uranium segment is involved in the exploration for, mining, and milling, as well as purchase and sale of uranium concentrates. Its operating uranium properties include the Cigar Lake property located in Saskatchewan, Canada; the Inkai property situated in Kazakhstan; the Smith Ranch-Highland property located in Wyoming, the United States; and the Crow Butte property in Nebraska, the United States.

Energy Fuels Inc. (TSX:EFR) (NYSE:UUUU)

The company engages in the extraction, recovery, exploration, and sale of uranium in the United States. It operates in two segments, Conventional Uranium and ISR Uranium. The company owns and operates the Nichols Ranch uranium recovery facility located in Wyoming; the Alta Mesa project located in Texas; and the White Mesa Mill located in Utah. It also holds interests in uranium and uranium/vanadium properties and projects in various stages of exploration, permitting, and evaluation located in Utah, Wyoming, Arizona, New Mexico, and Colorado.

Nexgen Energy Ltd. (NYSE:NXE) (TSX:NXE)

NXE is an exploration stage company that engages in the acquisition, exploration, and evaluation of uranium properties in Canada. Its principal property is the Rook I project that consists of 32 contiguous mineral claims covering 35,065 hectares in Saskatchewan. 

Uranium Energy Corporation (NYSE:UEC)

The company operates as a uranium mining and exploration company. Its projects in South Texas include the Palangana ISR mine, the permitted Goliad ISR project, and the development-stage Burke Hollow ISR project; and project in Wyoming comprise the permitted Reno Creek ISR project. The company also controls a pipeline of advanced-stage uranium projects in Arizona, Colorado, New Mexico, and Paraguay.

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