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Mine and project closures related to COVID-19 have begun to drive the uranium spot price higher, helping the metal break past $27 per pound.
Mine and project closures due to COVID-19 have begun to drive the spot price of uranium higher.
After spending the last year stuck below US$27 a pound, uranium has started to exhibit strength in the last few weeks, climbing by US$3 to reach US$27.40.
The sector, which has been plagued by low prices below US$50 for the last eight years, has been further impacted as countries around the world take a variety of measures to stop the spread of the coronavirus, including shutting down mine operations.
With the uranium spot price recording its largest month-over-month price increase since June 2018, the Investing News Network spoke to Independent Speculator Lobo Tiggre about the industry, including whether this price growth is sustainable and if COVID-19 is the catalyst the sector has been awaiting.
“It started just after Cameco (TSX:CCO,NYSE:CCJ) announced shutting Cigar Lake down. That alone is a big deal, but I think it also signaled more shutdowns to come,” said Tiggre. “That’s not a bad reason for any buyers sitting on the fence to decide to go ahead and lock in any low prices they can, while they last.”
The news that Cameco would curtail its remaining Canadian production indefinitely was followed by several other uranium miners reporting temporary shutdowns and project closures of their own.
Tiggre was speaking on Tuesday (April 6), before Kazatomprom, Kazakhstan’s nationally owned uranium miner and the world’s leading producer, announced plans to reduce staff at its operations across the country to comply with government health and safety protocols. The uranium miner also said it was dropping its annual guidance by 4,000 metric tons.
Speculating on such a move, Tiggre said, “Imagine if Kazakhstan starts shutting down mines in response to COVID-19? People still need their lights to come on at night, uranium fuel is still being used up … this combined with the supply disruption already visible could send uranium prices through the roof.”
Kazatomprom said on Wednesday (April 8) that it expects the measures to last for three months.
“We are now working with our joint venture partners on assessing the full impact and detailed implementation of this decision across all of Kazakhstan’s uranium mines, and we appreciate their support during these challenging times,” reads its statement.
In terms of where the uranium spot price will go, Tiggre sees it continuing to rally throughout Q2 and offered the following advice for investors: “If COVID-19 does drive uranium prices higher, that may not help a producer that’s shut down and hemorrhaging cash, and an explorer that’s low on cash might get more lowball takeover bids than joy from shareholders.”
He continued, “I want to see buyers come to the table with new long-term contract offers at substantially higher prices. Until that happens, anything good that happens in uranium today can be gone tomorrow.”
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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
