April 27th: Golden Rock Weekly Roundup
The Market, CGN Mining, Paladin, Bannerman, Palisades NPP Restart & US DoI
Market Update
The spot market rose from $65.20/lb to $67.00/lb for the week ending on April 25th. Activity has picked up coming out of the World Nuclear Fuel Cycle conference that was held in Montreal, Canada from April 8-10th. Headed into the conference, spot volumes have been anemic year to date.
Until this past week, a variety of headwinds kept action subdued for an extended period. First, trader activity has been restrained since last summer with few looking to build an aggressive net long book. This was primarily due to a physical uranium fund out of Kazakhstan, ANU, liquidating ~2.3M-lbs into the market that began in the summer of 2024. Quite frankly, the sale of this material was handled very poorly and, in many ways, helped freeze the market for the entire back half of 2024. One might pose the simple question, why didn’t Kazatomprom buy it back from ANU, since they are the ones who sold it to them? But, we’ll save that discussion for another day. This caused all players, including traders, to reduce positions and step aside.
Concurrently, as spot price fell in the back half of 2024, equity traders began circulating several bearish narratives:
· A peace deal between Russia and Ukraine would be bearish for uranium – false
· President Trump and Putin were cutting a deal without Ukraine’s approval – false
· A new Megatons to Megawatts deal will flood the market – laughably false
· President Trump would demand Ukrainian uranium mines for the US – false
· Kazatomprom ramps supply back up to 70M-lbs+ in 2025 – false
· Limited conversion capacities are why utilities won’t contract – false
· Sprott Physical Uranium Trust will need to liquidate millions of pounds – false
In uranium, narratives (both bullish and bearish) can be a key driver of equities and in turn, impact physical views on the commodity amongst physical traders. There is no doubt this happened over the last 2-3 quarters.
To add insult to injury, President Trump’s potential tariff plans on Canada help to re-freeze the market just as industry players were beginning to stir again this spring. While Canadian tariffs are exempt (at least, for now), it caused the market enough uncertainty to stall.
However, since spot peaked at 17-year highs of $107/lb (and thus bringing out inventory), the market has begun to perk up from $62-$63/lb. Since the long-term, base-escalated contract price remains ~$80/lb, this has given utilities an opportunity to take advantage of the carry trade again.
Quite simply, when the delta between spot and term prices are wide enough, it makes sense for utilities to enter carry trades (if they need nearby coverage or want to add to inventories). The length of a commitment can be determined by how large the spread is between spot and term.
Source: Golden Rock Research
In our “Implied Carry Trade” model, the carry trade works when the blue line is under the orange line. We use 5.5% financing costs and 2.5% carrying costs (insurance, storage, trading fees) and 3% escalation on base-escalated term contracts. Using $65/lb spot, a utility could presumably do a carry trade through year-end 2028.
Any new carry trades will drive demand to spot where a trader will “carry” the material until the delivery is called for. We expect further carry trade activity will drive spot demand until the spread collapses.
A couple of new long-term contract Request for Proposals (RFP’s) also hit the market in the past week confirming that long-term activity is picking up. However, it is incredibly important to understand that utility contract interest is wildly sporadic and lumpy. Simply put, there is nothing linear about their buying behavior. We continue to monitor activity and volumes as the year progresses.
CGN Mining Q1 2025 Production Review
Uranium investors should be paying very close attention to any production data they can get their hands on coming out of Kazakhstan. While Kazatomprom will disclose what is happening at all their mines during their quarterly updates, the market gets a “sneak peek” from two other sources- CGN Mining and Cameco, both of which have joint ventures with Kazatomprom. CGN released their Q1 2025 production update on April 22nd.
CGN holds two JVs in Kazakhstan comprised of four different mines:
· Ortalyk LLP is composed of two mines: Central Mynkuduk and Zhalpak
· Semizbai-U LLP is composed of two mines: Semizbay and Irkol
Actual production for Q1 2025 came in as follows:
· Central Mynkuduk: 392.5 tU or 1.02M-lbs (+16.3% YoY)
· Zhalpak: 35.3 tU or 910K-lbs (+10.0% YoY)
· Semizbai: 112.3 tU or 292K-lbs (+28.2% YoY)
· Irkol: 119.0 tU or 309K-lbs (+25.6% YoY)
· TOTAL: 659.1tU or 1.71M-lbs (vs. Q1 2024: 606.7 tU, +8.6%)
While total production for Q1 2025 came in +8.6% YoY or 52.4 tU (136K-lbs) over Q1 2024 results, it is important to remember that 2024 production came in well below expectations as Kazatomprom was forced to downgrade production estimates throughout the year. So far, annualized Q1 production comes in as follows:
· Central Mynkuduk: 1,570 tU or 4.08M-lbs
· Zhalpak: 141.2 tU or 141.2K-lbs
· Semizbai: 449.2 tU or 1.17M-lbs
· Irkol: 476.0 tU or 1.24M-lbs
We recognize that historically, Q1 production tends to come in a bit light versus the rest of the year. However, Kazakhstan has faced a variety of issues to their uranium mining business in recent years, so we feel highlighting this data is warranted. When we compare what consensus production expectations are in the market, these Q1 production numbers from CGN are potentially raising potential red flags that some JVs in Kazakhstan could remain under pressure in 2025 vs. guidance.
For 2025, Golden Rock estimates for full-year production as below:
· Ortalyk LLP: 5.20M-lbs 2025 estimate vs. 4.08M-lbs Q1 annualized
· Semizbai-U LLP: 2.80M-lbs 2025 estimate vs. 2.40M-lbs Q1 annualized
The next production update from Kazakhstan will come from Cameco on May 1st when they report their Q1 2025 earnings update. We eagerly wait to see their updated production from JV Inkai.
Then, on May 2nd, Kazatomprom will issue its “Q1 Trading Update” where the market will get a look at their attributable and total production for the first quarter.
We are not trying to pull a fire alarm on full-year production estimates but want to raise awareness that Ortalyk LLP and Semizbai-U LLP JV’s are underperforming expectations so far in 2025.
As a reminder, Kazatomprom has given total 2025 mid-point guidance at 25,750tU or 66.98M-lbs.
As we get more data from Q1 production, we will be able to update our estimated production numbers for the year and assess any market impacts.
Paladin Energy Q3 FY 2025 Quarterly Review
Paladin’s Langer Heinrich mine produced 745,484-lbs during their third quarter fiscal year 2025 (Q1 calendar year). The brownfield conventional project located in Namibia, uses alkaline leach processing and is currently mining medium grade stockpiled ore while it transitions to its open-pit operation and will soon combine stockpiles with mined ore.
The mine continues to ramp up as evidenced by its increasing tons processed, steady ore grades and back-to-back quarterly recovery rates of 88%. In March, a very damaging rainstorm caused a suspension of the operations, including saturating stockpiled ore and impacted processing plant chemistry. Additionally, flooding in the pit identified for commencement of mining has altered their plan and will use another pit that was unaffected by flooding. Plant operations have since resumed while local roads and civilian infrastructure sustained some damage.
In sales and marketing, Paladin averaged $69.90/lb realized price for the quarter reflecting their contracting strategy. As a reminder, they currently have twelve long-term contracts for 22.3M-lbs of U3O8 deliveries through 2030. Of this contracted quantity, 58% of the book is under “market-related prices” (spot price at time of delivery) and 42% is “base-escalated & fixed prices” (fixed price at time of contract signing or base-escalated which is also a fixed price but includes increasing prices per year, usually at a pre-determined inflation rate).
As of their latest ore reserves (published June 30, 2024), Paladin shows 52.0M-lbs of proved open pit reserves, 10.2M-lbs of probable open pit reserves and 20.4M-lbs of stockpiled material for a total of 82.8M-lbs (100% basis). Paladin holds a 75% interest in Langer Heinrich with Chinese National Nuclear Corporation (CNNC) holding the remaining 25%.
As a result, Paladin’s ore reserve ownership is 61.65M-lbs. Please note that CNNC has an off-take agreement with Paladin for CNNC’s ownership share near market-related rates.
In Q1 and Q2 of their fiscal year, they sold a total of 1.123M-lbs leaving ~60.5M-lbs in their attributable ore reserves. When we subtract out what is already on their contract books (22.3M-lbs), Paladin has unsigned reserves of ~38.2M-lbs that the company can market as they see fit.
Golden Rock estimates the mine to produce 3.5M-lbs in calendar year 2025. If we annualize the FY Q3 production rate, it comes in at 2.98M-lbs. However, we fully recognize the mine continues to ramp up and expect higher rates of production moving forward.
Their contract portfolio for 2025-2030 averages 3.72M-lbs (22.3M-lbs / 6 years) per year compared to a peak production run rate in the 5.9M-lb per year range. As a result, we believe Paladin will remain selective about new contracts as if the mine can reach nameplate production, as they can offer an additional ~2.2M-lbs per year through 2030. Given this information, investors will get a good look to see how disciplined the company is when it comes to marketing pounds over the next several quarters.
Bottom line, this was a good quarter for the company’s operations as Langer Heinrich continues to ramp up nicely, even after a disruptive weather event in the quarter. The mine continues to perform within our expectations and all current and future production is currently accounted for in our supply model.
Bannerman Energy Q1 2025 Quarterly Review
Bannerman Energy, a Namibian-based greenfield conventional uranium project reported their first quarter updates. The biggest takeaway came from their Executive Chairman, Brandon Munro who commented, “The current dislocation between long-term fundamentals and current trading conditions in the global uranium market is a sharp one. As a result, and despite being at a highly advanced stage with respect to all key workstreams, we are not seeing the appropriate market conditions to warrant finalizing offtake and financing arrangements with respect to the development of Etango”.
As a reminder to our readers, Bannerman completed their Defined Feasibility Study (DFS) on their fully permitted, 95% owned Etango-8 project in December 2022. The Life of Mine (LoM) plan calls for a 15-year mine life producing 3.5M-lbs per year using conventional open pit mine with heap leach processing.
As noted from the Executive Chair’s comments, while the project’s early works and long lead construction activities continue at site, the company continues to target a Final Investment Decision (FID) sometime in 2025, “putting ourselves in a stronger position to finalize offtake and financing agreements when the time is right”.
The bulk earthworks contract was awarded in August 2024 as part of a 24-month contract to completion which appears to be on track to be completed in late 2026. The contract for the blasting, crushing, and placement of the drainage layer for the heap leach processing pads should be finalized sometime during the second quarter of 2025. The water supply infrastructure has been in full operation (water in Namibia is a key aspect of any mining operation there) with installation of distribution pipes processing. Finally, the construction of power facilities was awarded in October 2024 and the construction of all permanent 33kV overhead powerlines and pole infrastructure is on track.
The Etango financing process continues with the company reviewing a range of funding options including conventional debt financing and strategic joint ventures with confidential discussions progressing with multiple counterparties. The company currently ~US$45M in cash and pre-production capex of US$353M with no debt.
Their uranium marketing program advanced with confidential discussions with several counterparties for initial sales contracts.
We will continue to monitor the development timeline for Etango as they are one of the few greenfield projects poised to come online this cycle. At Golden Rock in our base case, we model the mine coming online in 2030 at 3M-lbs per year.
Palisades Nuclear Plant Owner Says Restart Efforts on Schedule
A third round of federal loans has been approved to support the restart of the Palisades Nuclear Plant in Van Buren County, Michigan which closed down in 2022. US Department of Energy Chris Wright made the disbursement announcement on Wednesday, April 23rd, releasing $46.7M from a total of $1.52B loan guarantee to Holtec International. Holtec acquired the 805MW plant in 2022 with plans to dismantle it, but now it is on track to be the first commercial nuclear power plant to reopen after a previous shutdown. (Unit 1 of the Three Mile Island plant in Pennsylvania owned by Constellation Energy plans to re-start by 2028). Two electric cooperatives have confirmed plans to buy electricity from the plant.
New fuel is expected to be delivered this summer, Holtec announced in an April 7th news release. Holtec remains on track to restart operations at Palisades in October 2025 and the NRC expects to issue a final decision on the required licensing actions by July 31st.
At Golden Rock, we model the reactor using ~400K-lbs of U3O8 feedstock per year for a normal run rate using the following assumptions: 90% load factor and enrichment tails of 0.26. Please note that a re-start will include a freshly loaded core which can use between 800K to 1M-lbs of U3O8 (depending on tail assays). As a result, depending on one’s assumptions for the reactor, this re-start alone will add 1.2M to 1.4M-lbs of U3O8 demand for 2025.
US Department of Interior Implements Emergency Permitting Procedures
The US Department of Interior will implement emergency permitting procedures to accelerate the development of domestic energy sources and critical minerals. The measures are meant to expedite the review and approval process. The new permitting procedures will take a multi-year period down to just 28 days at most.
We will continue to watch for more developments on this front as it is difficult to tell how quickly projects could be advanced given the number of commodities/projects it will cover. Nonetheless, it appears that this is a major step in the direction of speeding up domestic energy projects.
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