The resurgence of Uranium prices continues, with yellowcake spot prices now above US$80 a pound for the first time in more than 15 years.
The rising prices and renewed demand have come with the belief in nuclear power as part of the future energy mix.
Supply disruptions from key miners have also highlighted the production shortfalls within the thinly traded market. This has opened opportunities for smaller players like Bannerman Energy [ASX:BMN].
An investor presentation and report yesterday brought the focus on this junior developer who’s been listed on the ASX for 18 years.
Bannerman is one of the top performers on the benchmark this morning, trading at $2.77 per share, up 4.14% on a day with wide losses in the market.
The company has seen its stock track uranium for much of the year, which has seen the company gain 40% in the past 12 months.
So what are their projects that are getting investor attention?
Source: TradingView (Uranium spot price in green)
Bannerman rides the bull wave
Bannerman excited investors after announcing at its investor day that it was near receiving final regulatory approval for its Etango Uranium Project in Namibia.
The company said it was now in the ‘advanced stages’ of planning and expected its final mining license by the end of the calendar year.
As managing director and CEO Brandon Munro put it:
‘Operating in Namibia is a real advantage. All of the export and transport logistics, regulatory capability, in-country skills and uranium consumer confidence have been in place for decades.’
Mr Munro has served as CEO of the company for seven years and has previously lived in Namibia. There he served as a trustee of the Namibian Uranium Association and has deep connections with regulators there.
The Etango project is located in Namibia’s Erongo region, near other uranium projects that could account for about 10% of global production.
Source: Bannerman Energy
The project itself holds a world-class mineral resource endowment of 207 million pounds (Mlbs) of contained uranium (U₃O₈).
The Definitive Feasibility Study (DFS) published at the end of last year estimated an average output of 3.5 Mlbs of U₃O₈ per year. The first estimates put the initial mine life of 15 years, but the company plans further extensions.
The operating expenses were estimated at US$38 per pound for the project, helping stoke excitement with the current rising prices.
With its final approval nearing, the mine development is now looking towards construction. The Front-End Engineering and Design (FEED) has begun with some groundwork already undertaken.
The company highlighted their derisking efforts with some of its pre-work. Bannerman showed the success of their Industrial-scale Heap Leaching method with a demonstration plant on site in 2015.
Commenting on the recent surge, CEO Brandon Munro said:
‘It has been an exciting quarter as we report continued progress on the Etango FEED against the backdrop of a significant rise in the spot price. This momentum continues to reflect favourable uranium market fundamentals, which have also been broadly mirrored in uranium capital markets.’
‘These dynamics continue to move in our favour as we advance discussions with prospective offtake customers and evaluate the range of project finance options potentially available to us in this environment.’
Outlook for Bannerman
The timing for its next steps could bode well with current prices. Bannerman now plans to complete its final investment decision in the first half of 2024 and begin construction.
Production at the site is planned for 3.5 Mlbs of output, with plans to upgrade the site to approximately 7 Mlbs in 2028.
According to the DFS, the company is looking at an IRR of between 17–25%, with prices ranging from US$65–80/lb.
But things remain uncertain about the longer-term trends of uranium prices.
The latest data shows European inventories have fallen 21% since 2018 as Western players shunned Russian nuclear fuel. This enriched uranium has for decades been the primary fuel for European reactors.
Additional pressure on the supply of uranium from Niger has also played its part. A recent coup there has caused miners to downgrade production estimates sharply.
These supply concerns could resolve themselves and see uranium correct in the shorter term. But some analysts think the longer-term story is one of shortages.
‘Utility contracting continues to pick up,’ Colin Hamilton, managing director for commodities research at BMO, wrote in a note.
‘There is very little uncommitted production available to meet uncovered utility requirements.’
Demand for nuclear fuel has picked up in 2023, most notably by France, who abandoned its plans to reduce its share of nuclear energy to 50%.
China is also moving towards nuclear with plans to increase its nuclear capacity from 38GW in 2017 to its current target of 120–150GW by 2030.
If these and other countries add a mix of nuclear for their low-carbon targets, some predict potential supply shortfalls in the next decade.
Source: World Nuclear Association, Nuclear Fuel Report 2023-2040
Time in the sun for uranium
As the world looks towards low-carbon energy, many countries, including Australia, haven’t fully explored all the options.
Many of our eggs are in the renewables basket and have sadly discounted nuclear as part of the mix.
But markets and governments are waking up to that fact and changing course.
Around 30 countries are considering, planning, or starting nuclear power programs. A further 20 have expressed interest.
Now that the fears are subsiding after the Fukushima accident, nuclear power is again back in vogue.
But Australia is still far behind. Editorial Director Greg Canavan has concerns about the current net zero policies. He thinks Australia’s focus on less energy-dense forms of power could see us left behind.
He’s written a special report on the subject that includes five stocks to watch as the net zero agenda crumbles.
Click here to learn more about five ASX uranium stocks that you won’t want to miss.
Regards,
Charlie Ormond
For Fat Tail Daily
