Parallels with Last Uranium Cycle Mean Consolidation – #12 Brandon Munro

Brandon Munro, Uranium Market Commentator and CEO of Bannerman Resources (ASX:BMN) calls in for our weekly catch up about the world of Uranium and Uranium investing.

Munro is back. What did we cover this week?

Matthew Gordon talks to Brandon Munro, 22nd June 2020.


New Entrants

Right now, there is a new wave of entrants into the uranium space. Uranium juniors now have a vastly enhanced ability to get financed. These companies have questionable levels of experience and uranium expertise, alongside assets that might not cut the mustard.

One important thing for investors to pay attention to is the current influx of names involved in the uranium space, particularly in Australia. We’re currently seeing some uranium “tragics” bringing product to the market. In addition, there are some big name promoters and brokers, who feature across the entire spectrum of commodities, that are positioning themselves firmly in the uranium space. They are putting their energy into backdoor listings and startups.

On the one hand, this paints the uranium market in a very good light; everyone is interested in uranium right now. However, this increased array of uranium choices carries with it an increased risk. Now, more than ever, investors need to determine how to exercise these new opportunities wisely.

An important component of these new entrants will be their promotional material.

A Necessary Evil

Some of the assets that companies are flouting as flagships right now don’t stack up. Moreover, the skillset needed to get the best out of these assets is extremely rare. If investors aren’t careful, they can be left with an unfinanceable asset in a dodgy mining jurisdiction with clueless leadership at the helm.

While over-promotion is always going to be quite distasteful, promoters themselves still have a critical role to play in the uranium renaissance. To spark price discovery, and to act as a catalyst for excitement in the space, uranium companies need to be rigorously communicating their story to the market. Many have been starved of capital for years, and the cost of capital means that some companies have no way forward. If uranium companies want to develop into stock winners for shareholders, they’ll need to whet the market’s appetite.

U.S. Initiatives For SMRs.

90% of current U.S. initiatives are focussed on the downstream; specifically, SMRs and the competitiveness of conventional reactors within the nuclear supply chain. It will be interesting to see what the government has up its sleeve for the front end in the coming weeks, as American uranium miners look on in anticipation. The current initiatives combined are only a drop in the ocean in a sector crying out for subsidisation. We’ll be delving into the details of SMRs in a coming interview and article.

Uranium Price Volatility Inbound?

As we approach the end of the quarter, Munro is predicting that volatility is around the corner for the uranium price. Right now, it is stagnant with low trading volume. This lack of volume means that single major players can have a large impact on the behaviour of the market. Kazatomprom’s and Cameco’s strategies are likely to become even more significant in the coming weeks. Both have spoken the language of de-stocking, but Kazatomprom’s track record may have investors believing otherwise.

Kazakhstan – Big News For Uranium Investors

Two of Kazakhstan’s senior members of government have contracted COVID-19. These individuals also happen to be integral to Kazakhstan’s uranium industry. What does this mean for the ‘3-month’ suspension of production for Kazatomprom?

For the first time, this is a clear indication that the chance of an extension is significant. Kazatomprom has already previously remarked that it has no intention make up any of the pounds lost from its existing shutdown, but an extension could further tighten the inventories of utilities, sparking a long-term uranium price rise. Uranium producers will be reluctant to return to normal operations whilst such events are unfolding.

Moreover, the health situation in general across the country is showing signs of deterioration. Kazakhstan will impose a two-day lockdown in the northern city of Kostanay and four nearby towns next weekend after a jump in fresh COVID-19 cases. While countries across the world are beginning to ease their lockdowns, Kazakhstan is in the midst of a second wave: a more protracted crisis, which is terrible for human life but favourable for increased uranium prices. There have been numerous new shutdowns and measures which will lead to a curtailment of all forms of activity by this weekend. This appears highly likely to be extended. Are you feeling bullish yet? The existing supply/demand deficit is growing larger by the day, as the missing pounds creep up. The only thing missing is a lack of clarity on how exactly this will impact the price of uranium equities.

The longer the shutdown goes on, the more recovery rates will fall for Kazakhstan’s uranium projects. The amount of deliverable uranium will be tapering rapidly, both for Kazatomprom and its JV partners. The market has not yet felt the crunch of the initial 3-month suspension, but it will be beginning to feel it now. Further shutdowns will have a cumulative effect. This will not cause contractual/commercial issues, but could also shift the sentiment of utility companies that, until now, have been biding their time.

What did you make of Brandon Munro this week? Which topics would you like us to cover next week? Comment below and we will respond.

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

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