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Since then, the world's largest uranium producer Kazatomprom accelerated equity gains for these companies with its announcement this week it would curtail production across its portfolio, setting the market up for what Red Cloud Securities equities analyst Derek Mcpherson sees as "a historical supply deficit".
Since Cameco's March 23 announcement that it would shutter the Cigar Lake mine and associated Orano-operated McClean Lake mill, investment vehicles with exposure to the sector have risen 37%, explorers gained 75%, developers gained 81%, producers added 46% and large producers gained 26%.
On the company level there were some spectacular equity performances, including Laramide Resources adding 295%, Fission 3.0 equity gaining 249% in the period, Anfield Energy adding 72%, Appia Energy adding 150%, GoviEx Uranium adding 145% and Fission Uranium adding 191%.
But these companies' equities started running even before the Cameco and Kazatomprom bombshells, moving out of negative 12-month territories since February 27, when the global clampdown against the spread of COVID-19 really started to get serious, with Fission, Fission 3.0, and Laramide equities gaining between 50-100%. since February.
The coordinated production shutdowns also meant the spot metal price immediately took a U-turn north, rising from below US$25/lb to testing the $30/lb-level once more.
Mcpherson said the Cigar Lake shutdown was potentially the catalyst the market had been waiting for to push it in a more positive direction.
"The fundamentals are favouring producers. With COVID-19 causing a spot market tightening of about 2.2Mlb per month, on top of 10.4Mlb removed from the market this year by Kazatomprom, we could see a return to long-term contracting by large utilities," said Mcpherson.
According to Red Cloud data, 37% of US power utilities' uranium demand was uncovered in 2022, representing about 9% of global demand. "We forecast a historical supply deficit opening up in the next decade, starting at 31Mlb in 2022 and rising to more than 100Mlb by 2034-35."
However, Mcpherson does not believe uranium's current tailwinds are done just yet. The longer the COVID-19 disruption lasts, the higher the probability for more production cuts elsewhere such as in Uzbekistan, at BHP's Olympic Dam and extended production suspensions at other top-tier assets.
The US Section 232-Nuclear Fuel Working Group saga has not concluded either, with Mcpherson optimistic the group would make public its recommendations public in the coming weeks.
"The proposed strategic reserve is for about 22-times the US mine supply and about 1.5-times overall US supply. It would favour US-focused developers and also free US utilities to enter the term market," he said.
