Key Takeaways from the TD Securities Uranium Conference

By : Greg Barnes, Craig Hutchison

November 8, 2022 - 2 minutes 30 seconds
Aerial view of an open pit mine
TD Securities hosted its annual Uranium Roundtable (virtually) on October 12. Attendance was strong again this year demonstrating the continued high level of interest in the uranium/nuclear sector. In total, 12 companies attended the event and more than 100 investors participated in the various sessions. Below we provide some of the broader themes that emerged from the presentations and "fire-side" Q&A sessions:

Key Takeaways from This Year's Presentations

  • There was broad consensus among the presenters that the surplus inventory that has overhung the uranium market for well over a decade has been eliminated. There is a markedly noticeable reduction in available inventories now as compared to the beginning of 2022. Producer purchases combined with buying by financial players have been the biggest draw on surplus inventories. Surplus inventories have overhung the uranium market since the Fukushima disaster in 2011 and placed a cap on any uranium price recovery. With the overhang now removed, the spot uranium price has increased to more than US$50/lb after hitting a low of just $18/lb several years ago.
     
  • While the spot market has seen limited activity over the past several months, the spot price has held within a very tight range between US$46-$52/lb. This price stability suggests that selling pressure is limited despite the low volumes being transacted. Spot market activity typically increases into the end of the year as utilities look to fill near-term requirements and sellers hope to move material prior to year-end. Over the past few weeks there has been steady upward pressure on spot uranium prices.
     
  • The lack of surplus uranium inventories combined with security of supply concerns result in utilities turning back to the term contracting market to meet their needs. Term contract volumes have also increased, standing now at more than 85 million pounds year-to-date and are set to exceed 100 million pounds in 2023 for the first time in over a decade. Furthermore, term contract durations are now stretching into the mid-2030s.
     
  • The incentive price for greenfield uranium project development to generate an acceptable return is well above the current spot and term prices. Cost inflation (opex and capex) is hitting the entire mining industry hard, and uranium projects will feel the same pressures. Roundtable presenters suggested that in their view, the incentive price is now probably within the US$65-$100/lb range.
     
Before Russia's invasion of Ukraine, factors including increasing price volatility, tightening supply in the spot market, and an increasing recognition that long-term supply is under threat were already contributing to nuclear utilities becoming more concerned about security of supply across the fuel supply chain. We expect uranium prices to see upward pressure over the medium-term as utilities proceed with the difficult process of de-risking and repositioning their nuclear fuel supply chains away from Russian supply in what is already a tightly supplied market. In addition, we believe that Russia's actions have highlighted energy security, particularly in Europe (and in Japan), further bolstering the case for nuclear power.

This material is intended to provide commentary on economic, political or market conditions.

Not Advice: The information contained in this material is for informational purposes only and is not intended to provide professional, investment or any other type of advice or recommendation, or to create a contractual or fiduciary relationship. Neither TD Securities (USA) LLC (“TD Securities USA”) nor any of its affiliates (collectively, “TD”) makes any representation or warranty, express or implied, regarding the accuracy, reliability, completeness, appropriateness or sufficiency for any purpose of any information included in this material. Certain information may have been provided by third-party sources and, while believed to be reliable, has not been independently verified by TD, and its accuracy or completeness cannot be guaranteed.

Not Securities or Derivatives Research: This material has not been produced, reviewed or approved by TD’s securities or derivatives research departments. The views of the author may differ from others at TD, including TD securities or derivatives research analysts.

Not Independent: The views expressed in this material may not be independent of the interests of TD.

Greg Barnes headshot

Greg Barnes
Managing Director and Head of Mining Equity Research, TD Securities

Greg Barnes headshot

Greg Barnes
Managing Director and Head of Mining Equity Research, TD Securities

Greg Barnes headshot

Greg Barnes
Managing Director and Head of Mining Equity Research, TD Securities

Greg joined TD Securities in December 2005 as the firm’s base metals analyst. He currently covers the Canadian large capitalization base metal, gold, and fertilizer mining companies and has been an equity analyst for 21 years. Prior to joining TD Securities, Greg worked as a mining analyst for several Canadian independent brokerage firms. He has a strong background in the mining industry, having spent two years with Kennecott Canada, a subsidiary of Rio Tinto, and four years with Falconbridge Ltd., where he was involved in corporate development and marketing.

Headshot of Craig Hutchison

Craig Hutchison
Mining Equity Research Analyst, TD Securities

Headshot of Craig Hutchison

Craig Hutchison
Mining Equity Research Analyst, TD Securities

Headshot of Craig Hutchison

Craig Hutchison
Mining Equity Research Analyst, TD Securities

Craig Hutchison joined TD Securities in 2008, and covers the junior base metal producers and development companies. Prior to joining TD Securities, Craig worked as an associate with a Canadian bank-owned investment dealer in Toronto. Before entering the securities business, Craig was employed as an engineer for eight years with a WSP Global (formerly GENIVAR) focused on project management.

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