The Month in U Inventory: Big Inventory Additions as SPUT Premium to NAV Touches a Four Year High

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Despite a volatile last week of January, markets ended considerably higher for the month with gold, silver and copper each attaining fresh all time highs, before retracing near month-end. That said, the spot uranium price ended the +21% higher, settling at $99.00 per lb (Numerco). The spot price range during the month was between $82.00-$101.50 per lb. The term price remains increased by +3.5% to reach $90 per lb, representing an 18-year high. The Sprott Physical Uranium Trust (U-U, U.UN) added 3.25M lbs of uranium inventory bringing its total to just over 78.0M lbs. The current inventory figure represents a notable ~4.3x increase to the 18.3M lbs held nearly four years ago when the Trust was launched, post Uranium Participation Corp. acquisition. Though now back to trading at a discount to NAV, in late January the Trust closed at a +9% premium to NAV, representing a high not seen in nearly four years. This came amid a backdrop of rising commodity prices and shortly after the filing of a $2.0B base shelf prospectus (final version). With that said, over the course of the month, a total of 3.25M lbs were added to inventory, representing one of the highest single month additions since 2021. With a yearly purchase limit of 9.0M lbs, the Trust maintains ample room for additional opportunistic purchases over the remaining 11 months of this year. Meanwhile, Yellowcake PLC (YCA) maintained its inventory level at just over 23.0M lbs.

Big tech continues to sign long term PPAs for nuclear power. In early January, Meta announced a landmark agreement for up to 6.6GW of new and existing capacity by 2035, with the likes of Vistra Corp, TerraPower and Oklo Inc. Elements of this nuclear power purchase agreement extend to 20 years and represent one of the most significant corporate purchases of nuclear energy in US history. Meta's purchases under the agreements will begin in late 2026, with additional capacity added to the grid through to 2034. The deal with Vistra Corp. involves a 20-year power purchase agreements (PPAs) for 2,176 MW of nuclear energy and capacity from the operating Perry and Davis-Besse plants in Ohio plus the purchase of energy from uprates at the Beaver Valley plant in Pennsylvania. The deals with TerraPower and Oklo represent support for the development of next generation energy technology slated to begin beyond 2030.

On the corporate front, we highlight Energy Fuels’ (UUU) Scheme Implementation Deed (SID) announced on January 20 to acquire 100% of Australian Strategic Minerals Ltd, a leading producer of REE metals & alloys. If the deal closes, the acquisition will position Energy Fuels as a champion to build a non-Chinese supply chain for rare earths. Elsewhere, Laramide Resources (LAM) announced its exit from Kazakhstan by terminating an option agreement for the Chu-Sarysu Project, due to newly enacted government policy changes. The option agreement was signed in September 2024 with Aral Resources and provided a framework for optionality on 22 subsoil use licenses in a very underexplored portion of a prolific ISR basin. We agree with the option termination and argued at the time that venturing into Kazakhstan would not only be a strain on precious financial resources but would also increase the company's risk profile by entering into an opaque part of the world that management had little prior experience with. Now glad that Laramide can devote its time and resources exclusively to projects in the US and Australia, our thoughts at the time can be read here.

Sprott Physical Uranium Trust (U.UN-T, U.U-T): 2-Yr Performance:

Over the month of January, the Trust’s uranium inventory increased from 74.789M lbs to 78.039M lbs (+3.25M lbs) as the total number of units outstanding accordingly increased from 311.070M to the current 330.931M. The inventory figure represents a notable 4.3x increase to the 18.3M lbs held ~four years ago when the Trust was launched, post Uranium Participation Corp. acquisition.

Valuation: Given current pricing and FX, SPUT's discount to NAV increased from last months discount of -2.7% to the current -5.5% discount with the Trust now trading at a 0.95x P/NAVPU relative to its intrinsic value of $32.56. Note that following a slight valuation premium in September 2023, the valuation discount has largely been maintained, apart from a brief period this past fall. The current -5.5% discount ranks well above the near -15.0% discount last seen in February 2023. Note that a premium of +9% was achieved before the commodities sell-off just a few days ago. Given our LT $100/lb price objective for the spot and a constant CAD/USD exchange rate, our 0.95x NAVPU valuation of $32.00 (rounded) per unit is being maintained. For further context, the current -5.5% discount to NAVPU is relative to +26% premium in September 2021 and -18.1% discount from July 2022. YTD shares in U.UN have advanced by +14.7%. The corresponding sensitivities to FX and the spot price are below:

Yellow Cake PLC (YCA-L): 2-Yr Performance:

Valuation: Given the most recent spot U3O8 quote at $99.00 per lb (or £72.27 per lb), YCA is trading at 0.97x P/NAVPU, or at a -3.4% discount given the current 1.0x NAVPU intrinsic value of £707.02. Though Yellow Cake normally trades at a larger discount to intrinsic value relative to SPUT (justifiably reflecting the smaller size, liquidity and larger perceived delivery risk associated with Kazakh sourced uranium), we feel that the current relative discount to NAV is being heavily influenced between the ever-present Russia/US geopolitical unease reflecting uncertainty over future sanctions on possible uranium supply from Russia and availability from Kazakhstan. Given our LT $100/lb price objective for the spot and a constant GBP/USD foreign exchange rate, our 0.80x NAVPU valuation of £705 (rounded) is maintained. As per YTD performance, shares of the Yellow Cake have advanced by +15.2%. The corresponding sensitivities to FX and the spot price are below:

Recall that under the Kazatomprom Framework Agreement (KFA), Yellow Cake maintains the option to purchase up to $100M of U3O8 each year for a period of nine years, starting from the company's IPO in 2018. That said, it is our view that geo-politics will continue to weigh on Kazakh sourced uranium, and in general on all companies with exposure to Kazakhstan, (despite current transport routes which completely bypass Russia). Recall that as announced earlier last summer, Kazatomprom reduced its FY/2026 production guidance going from the initially estimated 85M lbs U3O8 (100%) to approximately 77M lbs (100%), the decline largely reflecting adjustments from the Budenovskoye production area. This guidance revision came amid the current environment in which construction and the procurement of the needed production materials (notably sufficient levels of sulfuric acid) remains challenging.