Ten years ago, the tsunami and then meltdown at Fukushima put paid to the Uranium market. There was a demand shock and prolonged downturn as mines shut or entered care and maintenance. The spot price traded in a depressed range of
$US20 to $US30 a pound ... not nearly high enough to encourage production.
But after a decade in the shadows, the sector has been jolted back to life within just a few weeks thanks largely to the
Sprott Physical Uranium Trust (SPUT). The vehicle is in the midst of a buying frenzy of physical uranium, taking supply out of the market and boosting the spot price to
$US40.40 a pound ... its highest level in seven years.
There has been so much fuel on the floor of the uranium market given it has been such an undersupplied commodity, the portfolio manager of Tribeca's global natural resources fund, Ben Cleary, said. The match to set this on fire has been Sprott buying spot [uranium].
SPUT is the largest listed physical uranium fund and began trading on the Toronto Stock Exchange in July after Sprott Asset Management, a subsidiary of global precious metals investment manager Sprott Inc, purchased it from Uranium Participation Corp.
While the fund goal remained the same - buying and holding uranium to provide investors with exposure to movements in its spot price - the new SPUT structure as a trust allowed it to launch a $US300 million
at the market offering on August 17, meaning it could issue units and raise cash to consistently purchase the commodity.
The strategy is similar to the London listed Yellow Cake PLC, which has also been buying and holding physical uranium, albeit at a slower rate. The company holds 13.3 million pounds of the commodity in storage in Canada and France as of its latest quarterly update in August.
SPUT has purchased 6 million pounds of uranium in the spot market and deployed more than $US200 million of its ATM in the past month.
.....
One broker has a preferred exposure in Paladin Energy, which plans to restart its Namibian mine, having placed it into care and maintenance in August 2018. The stock has tripled this year to 82¢. Shaw & Partners upgraded its price target from 56¢ to $1.00.
Boss Energy announced this week that the engineering process to restart its Honeymoon Project in South Australia is running well ahead of schedule. Its share price has surged more than 150 per cent this year to 26¢. Shaw upgraded its price target from 17¢ to 30¢. The broker made the same upgrade to Peninsula Energy, while boosting the Vimy Resources price target from 25¢ to 27¢. Shaw & Partners has a buy rating on all four stocks.