Low Spot Price Hinders Uranium Participation’s Asset Value

Uranium investment company Uranium Participation (TSX:U,OTC Pink:URPTF) has posted a Q2 net asset value decrease of 10 percent to C$587,731, down from C$655,778 during the first quarter.

Despite reporting a quarter-on-quarter loss this period, the uranium fund recorded a year-over-year increase of C$65,010 for Q2.

U3O8 spot prices have hovered below US$26 per pound throughout the second quarter, which has weighed on investor sentiment and kept shuttered projects offline.

Following a promising start at the beginning of the year, U3O8 spot prices fell in early April from nearly US$29 in January to US$25.20.

Uranium Participation believes the price decline is related to the anticipation of results from the US Department of Commerce’s Section 232 investigation on foreign uranium imports in the name of national security.

The department passed down its Section 232 decision to US President Donald Trump on April 9, 2019. The president has 90 days to make a final decision.

One of the proposed actions during the investigation was a 25 percent domestic uranium production quota, which was later lowered to 5 percent.

The federal government recently issued a directive to increase domestic resource exploration and production, so it’s likely the president will look to implement a quota of some sort in order to engage explorers and miners.

Concern that America may shut its borders to uranium imports has also dampened prices by keeping utilities companies away from the uranium market. In past years, long-term supply contracts for reactor fuel were signed early in the year.

Uranium Participation remains confident that growing demand from the nuclear sector is promising for the spot price moving ahead, especially with so many projects and mines around the world offline.

“Another source of positive news came from Xcel Energy, a nuclear utility in the US,” notes the company’s report. “In May 2019, Xcel announced it would retire its last two coal plants in the US Upper Midwest a decade earlier than scheduled, and at the same time extend the life of its Monticello nuclear plant by another decade to 2040.”

Shares of Uranium Participation were down 3.14 percent on Thursday (June 27), trading at C$4.

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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.