Uranium fundamentals continue to strengthen as supply tightens and industry leaders gather

URANIUM FUNDAMENTALS CONTINUE TO STRENGTHEN AS SUPPLY TIGHTENS AND INDUSTRY LEADERS GATHER 

In recent months the uranium market has continued its upward trajectory, with the U3O8 spot price rising to a high of US$74.75/lb (TradeTech) last week. This market momentum, which has not been observed to this degree since before Fukushima in 2011, reflects both evolving investor sentiment plus favourable market fundamentals, both of which have been broadly mirrored in uranium equity markets.

The increasing global focus on clean energy in response to the global decarbonisation push has facilitated a public policy shift towards the incorporation of nuclear energy as a key baseload energy source. An increasing number of governments worldwide are turning to nuclear energy as one of the most viable means to achieve their emissions targets by 2025. Many have begun implementing policies to develop new reactors, extend the life of existing reactors, and incentivise investment in emerging technologies, such as Small Modular Reactors (SMRs).

A combination of increasing demand from utilities, depleting inventories, and supply threats have contributed to the ongoing price surge observed in the spot market. The supply of primary uranium remains tight due to supply constraints caused by the Russian invasion of Ukraine, political instability in Niger and reductions in production guidance by large producers. With a growing supply gap of some 150Mlbs anticipated over the coming years, producers are scrambling to find new sources of uranium, restart production of existing mines and finance the development of existing projects to meet this influx of demand. 

These are the major talking points being discussed amongst industry leaders, major utilities and uranium supply chain participants, who gathered across the globe at notable uranium and nuclear industry events over the past two months. The season kicked off with the World Nuclear Association’s annual Symposium in September. In mid-October, the Nuclear Energy Institute held their International Uranium Fuel Seminar, and last weekend, the first ever International Forum on Natural Uranium Industry took place in Beijing, China. I am proud to report that Bannerman was well represented at each event.

With the uranium sector heating up we are also seeing progressively greater interest at investor events across the globe. Many investors are entering the uranium equities market for the first time, attracted to this rapid acceleration in underlying uranium market fundamentals. Many are also returning to it, with strong recollections of what occurred last time the physical uranium market tightened in such a fashion.

How is Bannerman being covered?

Broker research coverage of the sector over the past few months has become increasingly optimistic, with many analysts reiterating the robust long-term outlook for the uranium market.  As a shareholder you will be pleased to be aware of the current price targets set by some of Australia’s major resources brokerage firms.

Euroz Hartleys: $3.40
“BMN continues to progress FEED activities on the Etango 8mtpa development scenario, while retaining optionality on a subsequent expansion to the 20mtpa throughput development scenario, for which the likelihood of being sanctioned lifts in line with strengthening uranium prices, in our view.” – 12 September 2023 

Canaccord Genuity: $3.33
“The uranium market is moving and history suggests that upward swings can occur with extreme prejudice. With growing support from communities and governments in response to the significant decarbonisation challenge, the prospects for existing generators have become more assured, and we expect the demand for uranium to sustain its upward trajectory.

“A potential limiting factor to this outlook is mine supply. Following a decade marked by underinvestment and mine closures, the market finds itself in a structural deficit (CGe ~30Mlb), a situation which must be remedied, in our view, if we are to maintain living standards while achieving global climate goals…

“BMN’s Etango-8 is all but shovel ready. With a mineral Resource of 207Mlbs U3O8 it is very material and is already attracting significant buyer interest. At 225ppm it is not high-grade but cash flow is more important than grade, and with AISC of US$38.1/lb it is highly economic under our long-term US$75/lb U3O8 price deck. BMN expects to be FID ready in 1H CY24 and we believe the next six months to see significant news flow from a bottom-up and top-down perspective.” – 19 September 2023

Shaw & Partners: $3.20
“Bannerman is the most leveraged stock in our coverage universe to an expected surge in the uranium price over the next two years… we upgrade our recommendation to BUY with a $3.20 price target which is set at 1.3x our DCF valuation in-line with its peers.” – 27 June 2023

Voting for Annual General Meeting

The company's Annual General Meeting will be held on Thursday, 9 November 2023 at 10am (AWST). Please see links to the letter to shareholders and the Notice of Meeting. The Notice of Meeting includes the meeting Agenda, Resolutions and Explanatory Statement for each resolution. The Company encourages all shareholders to vote by directed proxy. Note that, due to ASX increasing restrictions on the disclosure of AGM presentations, I will not be presenting my usual CEO address.

Proxy forms for the meeting should be lodged before 10:00am (AWST) on Tuesday, 7 November 2023.

Shareholders can access the Notice of Meeting and cast their vote by entering Control Number 183169 at the Computershare online voting platform www.investorvote.com.au.

Recap from NEI's International Uranium Fuel Seminar

The Nuclear Energy Institute organised the annual International Uranium Fuel Seminar in Charlotte, NC, from October 22 to 24, 2023. The event attracted over 200 leaders from the worldwide nuclear energy utilities, uranium, and broader nuclear fuel cycle industries. The seminar provides a platform for discussing key issues, current trends, and future prospects related to the nuclear fuel cycle. It also promotes networking and knowledge exchange among uranium miners, utility leaders, and investors. I regard this event as one of the three most important conferences in the nuclear fuel cycle, together with WNA Symposium and World Nuclear Fuel Cycle.
 
Bannerman was represented at NEI by our VP Market Strategy, Olga Skorlyakova. Olga is very well known to US utilities, both through her time with World Nuclear Association and because in the early part of her nuclear industry career, she sold enrichment services into the US market. Olga provided the below recap.

The seminar's main takeaway is the prevalent optimism about future demand for nuclear-generated electricity. However, there is significant concern about how the fuel cycle industry will meet long-term uranium, conversion, and enrichment needs.

Geopolitical issues, particularly those concerning nuclear fuel from Russia, were a focal point. The possibility of sanctions against Russian-origin fuel, which could threaten the fuel supply to the western reactor fleet, raised continuous questions. Both suppliers and utilities extensively discussed potential strategies to reduce reliance on Russian supplies, the associated challenges and solutions, and necessary steps to significantly decrease this dependency. With the Russian sanctions issue still under consideration by the US Congress, concerns arose that western utilities could lose Russian supply before Western conversion and enrichment production capacity is sufficient and ready to meet the needs of the western reactor fleet.

The seminar also touched on Kazakhstan and the escalating influence of Russia and China on the nation's uranium industry, as they have become the two largest importers of Kazakhstan uranium. Additional concerns related to Kazakhstan uranium involved challenges with sulfuric acid availability and the new Trans-Caspian route for uranium shipments from Kazakhstan to the West. This route was described as reliable but slow and challenging to manage.

Lastly, participants brought up the issue of human capital availability. A decade of disinterest in the nuclear industry and uncertainty about its development have deterred younger generations from pursuing nuclear specialties at universities. This has resulted in recruitment difficulties for experienced specialists and a need for investment in human resources.

The annual International Uranium Fuel Seminar (IUFS), organized by the Nuclear Energy Institute, took place in Charlotte, NC, from October 22 to 24, 2023.

Walkthrough the Etango Uranium Project

Bannerman is pleased to be presenting at the RIU Resurgence Conference this year, which is being held on 22-23 November at The Westin in Perth, Western Australia. I am excited to be presenting at RIU Resurgence, which includes two dedicated 'Uranium Power’ sessions on Day 1 (yet another telltale sign of the building global investor focus outlined above).
 
I would like to extend to you an invitation to attend this event. Attendance is free and will allow you the opportunity to hear from myself and the Bannerman team about our current activities at Etango and more broadly. The ‘Uranium Power’ sessions will also include dedicated sector analysis, including an opening keynote address and concluding panel discussion.

Full catering will be provided, and the end of the ‘Uranium Power’ sessions will be followed by networking drinks. I look forward to the opportunity to converse with you at the Bannerman booth, and to take you on a 3D walkthrough, assisted by VR technology, of our world-class Etango Uranium Project.

You can register for the conference ticket here.

The Etango Heap Leach Demonstration Plant ran from 2015-2020. The pilot plant comprehensively de-risked the proposed heap leaching processing method for Etango and allowed optimisation of processing parameters