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

Uranium stocks soared on Tuesday following a burst of reports from top producers who are in the market for uranium in the spot market.

It started with Kazatomprom, the world’s largest uranium producer, which Bloomberg reported may buy the nuclear fuel in the spot market after a London-based investment company exercised an option to purchase the metal. Yellow Cake Plc, which bets on uranium prices, said on Monday that it had exercised a $100 million purchase option with Kazatomprom. Yellow Cake also said it plans to make additional purchases if it sees value opportunities.

“We will evaluate our inventories and it’s possible we will buy material from market” to cover part of our deal obligations, Askar Batyrbayev, chief commercial officer at Kazatomprom, said in interview. The miner’s uranium inventory fell by 21% to 6,761 tons last year as production declined, but remained within its target range, it said on Tuesday.

The state-controlled Kazakh miner charged 10% more for its uranium last year as the coronavirus pandemic pushed up prices. As reported previously, both Kazatomprom and Canada’s Cameco have also cut output to reducing the global glut that built up following the 2011 Fukushima disaster in Japan.

In a note this morning from GLJ Research founder Gordon L Johnson, he reiterated his bullishness on the sector which is "nearing an inflection point" due to three catalysts. Following up on the Kazatomprom news, he wrote that Yellow Cake also announced the purchase of an additional 440K pounds of U3O8 at a price of $27.34/lb in the spot market. This followed the company's recent acquisition of 3.5 million pounds U3O8 from Kazatomprom. As GLJ explained:

we see this as (very) bullish owing to: (a) the fact that Yellow Cake's price paid was higher than last week's spot price, (b) Yellow Cake is stocking up on physical uranium - for investment purposes - suggesting the company sees the uranium price as near-bottom, (c) this should work to remove concerns of spot market oversupply, and (d) with total inventory at Yellow Cake now at ~13.3mn lbs U3O8, at an average price of ~$24/lb, others may be encouraged to procure U3O8 uranium at current prices out of fear of being undercut buy more opportunistic competitors

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