Yahoo Finance Cameco and Canadian uranium peers rally as world's top producer cuts 2025 target
Shares of Canadian uranium miners rallied on Friday after the world’s largest producer of nuclear fuel slashed its production target for 2025, adding to long-standing concerns about short supply.
Kazatomprom says it produced about 20 per cent of the global uranium supply in 2023. On Friday, the Kazakhstan state-owned miner cut its target for next year by about 17 per cent. The company blames uncertainty around sulphuric acid supplies for 2025, and construction delays at its newly developed deposits, for the expected shortfall. In January, Kazatomprom warned its 2024 production is expected to be impacted by similar issues.
Canadian uranium producers Cameco (CCO.TO)(CCJ), Denison Mines (DML.TO)(DNN), and NexGen Energy (NXE.TO)(NXE) saw their stocks rise in Friday’s session as investors bet on upward pressure on the price of uranium.
Toronto-listed Cameco shares closed 4.75 per cent higher on Friday at $57.58. Denison and NexGen shares finished the trading session up 12.81 per cent and 8.96 per cent, respectively.
Data firm UxC lists a weekly price of US$81 per pound as of Aug. 19. Earlier this year, Toronto-based Sprott Asset Management predicted short supply could support prices above US$100.
Sprott CEO John Ciampaglia says while Kazatomprom's acid shortage is legitimate, the company is also interested in prolonging the current bull market for uranium.
"We know that the sulfuric acid shortages are real, and are not going to be addressed any time soon," he told Yahoo Finance Canada on Friday. "We also think there is an element of them being unwilling to increase production materially. Their message is very clear. They're focusing on value over volume."
Demand for cleaner forms of energy has prompted a series of policy "U-turns" in recent years, with governments from Japan to Germany revising plans to phase out nuclear power. The World Nuclear Association says demand from reactors is expected to climb 28 per cent by 2030, and nearly double by 2040.
Ciampaglia says the typical supply response to high prices is playing out slower than many nuclear utilities had thought, pointing to the weakened state of the industry after the 2011 Fukushima accident in Japan.
"The mining sector was basically on life support from 2011 to 2020. You have a lot of atrophy that builds in the sector and its supply chains. Irrespective of whether the price is US$200 a pound, the industry can't immediately press a few buttons and get going again," he said.
"It should be a real wake-up call that security of supply for these utilities should be paramount."
The TSX-listed Sprott Physical Uranium Fund (U-UN.TO) closed 4.81 per cent higher on Friday.
New York-based commodity research firm Goehring & Rozencwajg anticipated Friday's announcement of lower production guidance from Kazatomprom. In a blog post published on Wednesday, the researchers predict the situation will exacerbate a "structural supply deficit" for uranium.
"If Kazatomprom reduces its guidance as we anticipate, the uranium market could very well turn chaotic as buyers are forced to acknowledge the extent of the deficit," they wrote.
"We believe the uranium bull market is far from over. Production shortfalls will fuel the next phase."
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.
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