Uranium price rebound is overdue, and these African projects are getting ready

News.com.au

22-04-2025

Uranium spot prices have remained stubbornly low this year, with one developer pausing FID due to what it calls a "broken" market
But market experts say supply and demand imbalances will continue to grow, forcing utilities to accept higher prices
These African players are well placed for a market rebound
Uranium stocks are suffering from negativity linked to a slide in spot prices, which have fallen from decade long highs of US$107/lb to ~US$64/lb between early 2024 and today.
That has led some large players to pause new developments and delay FIDs, the latest and most notable the John Borshoff-led Deep Yellow (ASX:DYL).
Borshoff, an industry veteran who previously led the construction of Paladin Energy's (ASX:PDN) Langer Heinrich mine in Namibia, this month again delayed FID on his new firm's Tumas project in the same south-west African nation.
Tumas is expected to cost US$474 million to bring to life and run at an operating cost of US$35.02/lb U3O8, running at a post-tax NPV of US$577m ($912m) and IRR of 19% at a price of US$82.50/lb.
But with spot prices trading at a discount, Borshoff says the uranium market is "essentially broken".
"'We are at an extraordinary stage in the uranium supply sector. We have a situation where the long-term uranium market is essentially broken," he said.
"This is due to more than a decade of sector inactivity, persistently depressed uranium prices, and utility offtake contracting practices which are yet to support the development of greenfields uranium production.
"Although the Tumas Project is economic at current long-term uranium prices, these prices do not reflect or support the enormous amount of production that needs to be brought online to meet expected demand."
Borshoff thinks demand from decarbonisation and increased energy requirements from sectors such as data centres is 'undeniable'.
There are other market watchers who think the recent lull in uranium pricing will only serve to deliver higher prices down the line.
Adam Rozencwajg of US fund managers Goehring and Rozencwajg still counts uranium among the fund's four key pillars, alongside crude, US gas and gold. He says nuclear power is "by far the most efficient" form of energy.
"I think the long-term story for nuclear power is amazing. I think you're starting to see people wake up to that, and you're starting to see a massive, massive swing back towards nuclear, both in the West and certainly in China," he said.
"There's just simply not been enough new mine development.
" I think this has a lot of legs to it because it's such an efficient source of energy. And the tech companies are now waking up to it, too."
African uranium opportunities
When markets do return, it could be operations in Africa that move first.
While Canada's Athabasca Basin holds the world's largest and highest grade deposits, when it comes to uranium mining – and especially speed to market – grade is not always king.
African hosts lower grade resources that are close to surface and comparatively cheap and simple to process.
And those jurisdictions which play host to its uranium riches tend to be among the most open to new developments.
One of those in the potential pipeline is Aura Energy's (ASX:AEE) Tiris project in Mauritania.
Remote and sparsely populated but home to a handful of large gold and iron ore operations, the initially 2Mlb per annum Tiris would be the first yellowcake producer in the north-west African jurisdiction.
But MD Andrew Grove said support from the Mauritania Government had been strong.
"We're getting very, very good support from the ministries and you can actually execute on a timely basis," he said.
"You can't build a uranium mine in Western Australia. Australia's got very, very significant, probably the biggest resources of uranium in the world and the political environment is not supportive of any development.
"That goes a little bit beyond uranium as well. We like Africa because it's underexplored and you can find good deposits and secondly, you can actually execute on those. You can get your licences and build."
Tiris will come with a capital cost of US$230m and all in sustaining cost of US$35.7/lb, generating an NPV of US$499m and IRR of 39% after tax with a payback period of just 2.25 years at a price of US$80/lb.
"It stands by itself in current pricing. So we're comfortable to keep progressing on that for our project," Grove said.
" It takes time to build mines and find deposits and put mines in production and I think the whole supply-demand picture based on nuclear power means that we do need more mines and more production coming on board."
The worm will turn
If all goes to plan Aura – which could have 50-60% of its funding costs covered by a Western sovereign development bank – will be in production by 2027.
Grove says in that time, uranium could correct hard.
While contract pricing remains around US$80/lb and reflects over 85% of total uranium sales, the spot market is more visible and tends to dominate equity investor sentiment.
But when that sentiment turns it can move quickly, as occurred when prices hit all time highs in 2007 and again from 2021-2023 with the arrival of the Sprott Physical Uranium Trust.
"What I also think we're seeing is, given the turbulence we're coming through with Trump's tariffs, the utilities haven't been into the market much at all this year," Grove said.
"They've either been worried about tariffs – (although) obviously uranium was excluded from the tariffs under Trump's policy – so they really haven't been in the market.
"They can afford to keep out of the market a little bit because ... it's a long-term process for the utilities, by the time they buy uranium oxide with yellowcake, it takes circa 18 months to enrich it and make it into fuel pellets to go into the power station. So they've always got a bit of inventory on their books.
" As a lot of the commentators will say, it's going to correct (and) it is going to correct hard. The timing of that I don't know – soon, I hope."
One group clearly betting on that eventual outcome is the US uranium fund Sachem Cove.
Mike Alkin-led Sachem Cove built large positions across the uranium developer landscape when prices were recovering from post-Fukushima lows of US$18/lb close to a decade ago.
They recently emerged as a major backer of Aura, taking $6.5m of a $9m placement launched in December last year before buying another ~17m shares on market to take their stake in the ASX junior to 6.97%. That's called the smart money.
"They've put a lot of confidence in our ability to fund and execute this project," Grove said.
"While it's a new jurisdiction, they like the metrics of the Tiris project, being very shallow mineralisation, very low mining risk, low costs at US$36 a pound, good economic metrics.
"They're comfortable enough to invest quite a significant amount of money into our shares to support us on the process. It's very pleasing that they've got such a strong positive view towards us."
Uranium revival
Fellow African uranium explorer Elevate Uranium (ASX:EL8) has a similarly shallow resource at its Koppies project in Namibia.
It is led by Murray Hill, who has previously made the bold call that uranium prices could sky-rocket to US$150/lb, around all time highs seen in the 2007 bull run.
"I think there will just be some event that someone realises there's not enough uranium around to satisfy demand and uranium prices should go off a bit," he recently told Stockhead.
Whether or not that happens this year is up in the air, especially with uncertainty around the US economy, and the eventual lay of the land in relation to Donald Trump's tariff policies.
But Hill believes uranium will be in a "fantastic spot" in five years' time, as data centres begin to consume more and more energy
"I mean someone said the other day that a simple Google search with AI consumes eight times the energy as a Google search without AI. Now where is that energy going to come from?" Hill quipped.
While he won't go as far as Borshoff's claim that the uranium market is 'broken', Hill said utilities were still behaving in the market as if the surplus seen in the post-Fukushima years, characterised by strong Kazakh output into a market sapped of Japan's reactor demand, was still in place.
One problem is the divergence between the spot market and the opaque contracting market, where prices of US$80/lb remain around decade highs, indicating that when they do need to enter the market fuel buyers are willing to stump up a decent amount for supplies.
Similar to Aura, Elevate has the benefit of hosting the vast bulk of its Koppies resources close to surface.
EL8 is taking the opportunity to enhance its resource base ahead of the construction this year of a demonstration plant, which will be built in Perth and freighted overseas to Namibia to test its patented U-pgrade process.
The technology will be used to process at least 60t of Koppies ore. Bench-scale test work on ore from the Marenica project also in Namibia has shown the potential to reject 98% of the mass from leaching and concentrate low grade uranium ores by a factor of 50.
Koppies contains 66.1Mlb U3O8 at a grade of 190ppm, with 78% in the indicated category. But drilling is ongoing to define a resource at Namib IV, around 20km from the southern portion of Koppies.
Hill told Stockhead the developer was ensuring it was able to deliver on the U-pgrade demonstration plant after raising $25m in a placement last year, backed by investors including the pro-uranium Australian insto Paradice Investment Management, which holds a ~10% stake.