COP28 support for nuclear and US ban on Russian product sets up uranium for a booming 2024

Hasn’t the worm turned for the uranium sector? It has all the hallmarks of becoming the boom sector of the ASX in 2024.

The nuclear fuel has been the best-performed commodity in 2023, rising from $US40/lb at the start of year to 15-year highs of more than $US80/lb in recent days.

A recognition by nuclear power utilities that uranium’s long winter of discontent was over and that they had best re-enter the contract market to secure long-term supplies has been behind the 2023 price surge.

The price performance was impressive stuff all right, and naturally enough poses the question of where to next?

Uranium has a history of breaking out in a big way as much as it does for collapsing in a big way, as it did when nuclear power growth forecasts were slashed in response to Japan’s Fukushima plant being swamped by a tidal wave in 2011.

But two recent remarkable events suggests that uranium will enter the new year full of momentum to the upside.

First up there was the communique signed by 22 nations at the COP28 summit in Dubai that they supported a tripling in nuclear power generation by 2050.

The signatory nations, including the can-do United States, which already gets 18% of its low-emissions power from nuclear power, account for 43% of the global economy.

Anti-nuclear types were quick to say it was a pipedream, suggesting building nuclear power plants was a slow and expensive exercise.

Joe Biden’s climate change envoy John Kerry had other ideas, saying “trillions of dollars” would be available for the tripling plan.

“You can’t get to net-zero 2050 without some nuclear,” Kerry told the Dubai gathering, which was also notable for the bigger contingent of countries that signed up for the phasing out of fossil fuels of all types.

If that wasn’t enough to buoy the spirits of the uranium producers and explorers, the US House of Representatives followed up by passing legislation to ban all imports of enriched uranium from Russia.

The US relies on Russian enrichment for more than 20% of its reactor needs. “This has given Putin a dangerous amount of leverage over America’s energy security (doubly so when fossil fuels are on the way out),” Congresswoman Cathy McMorris Rodgers said in support of her bill.

It was passed by the House with a “voice vote,” indicating bipartisan support. It is now over to the Senate to pass the legislation.

Cutting off Russian supplies and those from Kazakhstan, Russia’s ally, albeit wavering, is not going to be easy as the US has to rebuild its own uranium and enrichment capability.

And it will come at a cost which will impact the pricing of nuclear power. But it seems both the environment and the strategic interests of the US will prevail.

Take all of the above, and it can be said that ASX uranium companies have lots to celebrate at their 2023 Xmas bashes.

Having said that though, it is not as if there has been an explosion in the market values of the cohort in the dying weeks of 2023.

That’s because equity investors front-ran uranium’s price rise during 2023 on the expectation that power utilities would have to re-enter the contract market, as they have done.

A greater appreciation of what came out of COP28 and the US House of Reps on the case for uranium will sink in before long, potentially carrying the ASX players to new heights in 2024.

Boss, Alligator and Cauldron:

It’s fair to say that the ASX uranium sector has been preparing for a renaissance of sorts on the back of utilities writing long-term contracts again, and the COP28 confirmation of nuclear power’s key role in decarbonisation.

The Russia ban is something else again.

The early positioning to a roll out of good times is reflected in the planned resumption of yellow-cake production by Boss (BOE) and Paladin (PDN) in coming months, and the advancement of new projects through the scoping/feasibility stages by Alligator (AGE) and Cauldron (CXU), among others.

Boss’ early planning for the good times is of particular note given its purchase of physical uranium was a de-risking exercise for its Honeymoon project, and as a demonstration of its belief that uranium was about to take off, back when uranium was $$US30/lb.

The 1.25 million pound uranium stash is now worth more than $160m for a $110m profit.

As mentioned previously, Boss is close to producing its first yellowcake at Honeymoon. The missing piece in its return is supply contracts to cover future production, or most of it at any rate.

Given the first drum of Honeymoon yellowcake is in the works, it would not surprise if there is some news of a supply contract(s) before long. To many followers of the stock and those that may have stood aside, it will be a major de-risking event struck at the right time of the pricing cycle.

Arrow/Flanagan:

A Rio Tinto-led consortium and a Chinese-backed one are planning to bring their adjacent Simandou iron ore projects in Guinea into production before the end of the decade at a cost of $US23 billion.

It is big-end of town stuff with implications for small end of town iron ore explorer Arrow Minerals (AMD) which has its foot on iron ore exploration ground to the north of Rio/Chinese shared Simandou.

But how to proceed when you’re a junior? Call in the ever-bustling David Flanagan, best known for founding Atlas Iron which against the odds, developed five iron ore projects in the Pilbara before he moved on and before Atlas was absorbed by Gina Rinehart’s Hancock Prospecting.

If anyone is going to get Arrow and its Simandou North project to the starting stalls, it will be Flanagan. He will face similar challenges to those faced in the Pilbara, namely finding a rail and port solution.

In Atlas’ case, the solution was trucks replacing rail because the incumbents had no intention of sharing, and the opening up of Port Hedland to the company and other juniors.

In the cased of Simandou North, the plan will be to piggyback off the rail and port infrastructure being put in by Rio and its Chinese neighbours to get Simandou’s high-grade iron ore to market.

So there will be lots of twists and turns before Arrow’s pathway to market is pinned down. And before that, it obviously needs to confirm a substantial high-grade resource sits on its tenements.

But again, if anyone is going to lead Arrow down that pathway, it is Flanagan.

Arrow has just raised $4m at 0.1c to get Flanagan going. The stock last traded at 0.3c

Talisman:

Kerry Harmanis has long let it be known that he won’t be riding off into the sunset until he scores another big minerals discovery.

Harmanis was the big winner from the $3.2 billion sale of his Jubilee Mines and its high-grade Cosmos nickel discovery to Xstrata (now part of Glencore) in 2007.

Having tasted success with the drill bit, he wants more, with his 18.5% owned Talisman (TLM) one of his vehicles of attack to find another big ‘un.

NSW’s prolific Lachlan gold belt is its stomping ground and it has the luxury of being self-funding courtesy of an iron royalty back in Harmanis’ home state which delivered $7.8 million to the company coffer in FY2023.

The company – it is trading at 22c for a market cap of $41 million – has not found the big ‘un just yet but it has certainly been generating what might be called big sniffs at both the Rip N Trear and Durnings projects.

They lie to the north of south of Kingston’s (KSN) Mineral Hill operation, currently processing tailings and moving to better utilise its processing capacity next year but by processing open-cut material.

Durnings caught the eye this week with a zone of lead-zinc-silver-copper-gold mineralisation from 246-286m of lowish grade including a 6m zone grading of 10.3% lead, 126g/t silver, 3.5% zinc, 0.4% copper and 1.93g/t gold.

Tote that up and it points to high value dirt (10g/t gold equivalent if you think that way, which you shouldn’t). And it looks as if the broader 40m zone has a strike length of 1.3km.

It is early days for sure but Harmanis has good reason to be encouraged to think his backing of Talisman – he is also its chairman – might yet deliver his next big ‘un.