Uranium Stocks Surge On Flurry Of Producer Purchases In The Spot Market

Johnson's second catalyst is Denison Mines announcing financing to fund purchase of about 2 million pounds U3O8 uranium around $30/lb shows a large bet for higher prices: "stated differently, we see this as a fairly strong statement demonstrating a large bet for higher prices, while also taking more product off of the market."

The third and final catalyst noted by Johnson is that Denison and NexGen were being added to Canada’s benchmark index S&P/TSX, which means that ETF’s that track the index will be buying shares of these uranium stocks: "given Cameco (CCO; BUY) is currently the only uranium stock in the S&P/TSX, and our work suggests the direct index buying for NXE, alone, will come in around 16mn shares (i.e., 4% of the 377mn share float), we believe Monday, Mar. 22, 2021, could be a great day to be long the global uranium space."

Separately, and also on Tuesday, Uranium Energy Corp (UEC) announced it was establishing a physical uranium inventory to take advantage of spot purchases below most industry production costs, adding additional asset value to the balance sheet. According to the PR, the uranium inventory will provide greater marketing flexibility for utilities, while freeing up UEC's domestic mine production for the U.S. Uranium Reserve, and other U.S. origin specific opportunities. The company said it had entered into agreements totaling $10.9 million to purchase 400,000 pounds of uranium concentrates at ConverDyn in Metropolis, Illinois at a volume-weighted average price of $27.29 per pound.

Why does all this matter? Because as GLJ explains, the recent spike of Uranium spot market purchases from a flurry of producers/funds who have all simultaneously entered the spot market at the same time "is the most aggressive buying we’ve seen since we started following the Uranium sector in 2010. And, as would expected, the Uranium spot price is responding, now up over $29/lb, and +6% since yesterday’s open, which is the largest one-day move in spot since Mar. 2020 (Ex. 1)."

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