World’s largest uranium mine closure set to catalyse rebound

The global uranium market just received its biggest shake-up since the market subdued, following last week’s announcement from Cameco to shutdown their McArthur River and Key Lake mines in Canada.

Weak uranium prices following the 2011 Fukushima disaster have canabalised many uranium producers but with the shutdown of Cameco’s mines, more than 10% of global uranium production will be eliminated from the market.

If Cameco’s intended effect comes to fruition, this could potentially prompt a significant rise in the commodity spot price.

“Until we are able to commit our production under long-term contracts that provide an acceptable rate of return for our owners, we do not plan to restart,” said Cameco CEO Tim Gitzul.

Cameco’s decision to shut down its mines comes at a time when uranium, the fuel source of nuclear power, is in hot demand. The number of operating nuclear reactors in 2018 now surpassing the pre-Fukushima number. Around the world, there are now 452 operating nuclear reactors, 57 under construction and a further 152 planned, according the to the World Nuclear Association.

So, what does this combination of bottomed-out prices and growing demand for uranium mean for investors? Well, it means there are a number of opportunities to invest in potentially significantly undervalued companies which is why we have seen a sizable amount of institutional investors entering the uranium market over the past three months.

This was evidenced recently following the $200 million IPO of Yellow Cake plc, a fund solely focused on capitalising on subdued uranium market conditions, having purchased $170 million of uranium stockpiles and committing a further $100 million annually for the next nine years.

This supreme vote of confidence in uranium is being driven by the efficiencies of nuclear power which cannot be denied. It is cleaner, cheaper and more sustainable than environmentally damaging fossil fuels.

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