Thanks to continued positive movements, the spot price chart is starting to show a very encouraging trend! In fact, it’s up 42% since December, 2016. There was a big spike when Kazatomprom made its production cut announcement but as you can see from the chart I’ve included here, you can see that the upwards push began before that.
Clearly more buying is taking place than we saw in most quarters last year but I think there’s more to it than just buying volume.
Kazatomprom’s decision to cut production has been largely interpreted as sound business sense and good corporate citizenship (and it is indeed both). However, this is the same company that has relentlessly increased production year on year, regardless of previous spot price activity. After all, when your production costs are as low as theirs, and your country doesn’t have any other internationally competitive industry, how much do you care about spot prices as long as the money keeps flooding in? Their previous actions suggest they haven’t up until now.
So what has changed? Well, there has been speculation for some time that production in Kazakstan was close to peaking and, having spoken to several connections in the sector, there is strong speculation that the company had no choice but to cut production this year. In other words, the seemingly never-ending Kazak uranium machine finally has to start slowing down.
Add all of this to Cameco’s profit, production and tax struggles, you can clearly see that utilities are waking up to the fact that the uranium surplus that has been in play in recent years, is dwindling.
We still have a way to go. However, when your project hosts the world’s only major high-grade deposit, and additional zones, that are shallow enough to be open-pitted (see our PEA for preliminary economics), you are well funded and you have the most-awarded technical team in the business, things are definitely headed in the right direction.
Dev Randhawa, CEO of Fission Uranium