The Month in U Inventory: Executive Orders & Continued Production Weakness Push Spot Higher

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The spot uranium price ended the month of May +5% higher, settling at $72.00 per lb (Numerco). That said, the price range during the month was between $68.38-$72.00 per lb. The price appreciation during the month was largely due to a combination of positive newsflow regarding US Executive Orders providing further support to the domestic rollout of nuclear, along with continued production weakness from the uranium producers.  

As announced in late May, Executive Orders were issued by the White House with the goal to quadruple US Nuclear capacity from 100GW to 400GW by 2050. In order to reach this ambitious goal, the three-pronged approach encompasses reinvigorating the nuclear industrial base, reforming nuclear reactor testing and reforming the Nuclear Regulatory Commission (NRC). A White House statement summarizing the impact of the orders, stated: "Today's executive orders allow for reactor design testing at DOE  labs, clear the way for construction on federal lands to protect national and economic security, and remove regulatory barriers by requiring the Nuclear Regulatory Commission to issue timely licensing decisions".

On the corporate front, enCore Energy (EU) reported its results for the Q1/2025 period in which 130,015 lbs was extracted from Alta Mesa in South Texas, for $36.11 per lb. During the quarter, delivery of 290,000 lbs was concluded at an average price of $62.89 per lb. Though extracted volumes will need to meaningfully increase, the increasing number of active rigs on site (now numbering 22 as of March 31) along with the successful recent startup of a second Ion Exchange Circuit at Alta Mesa should set the framework for eventual volume increases. That said, during the Q1/2025 period, a combination of higher priced purchased lbs (far surpassing the cost of Alta Mesa extracted lbs) lead to slightly negative sales margins when delivered into contracts. From Ur-Energy (URG), operations during the quarter from Lost Creek amounted to 83,066 lbs dried and packaged and 106,301 lbs U3O8 shipped to the conversion facility. With head grades being maintained on target, wellfield flow rates have increased by 44% since the beginning of March 2025. The company is now routinely reaching flow rates of over 2,800 gpm. Ur-Energy anticipates delivering 440,000 lbs U3O8 at an average price per lb sold of $61.56 in FY/2025. Lastly, Peninsula Energy (PENMF) announced that it had received the main regulatory approvals needed to commence recovery operations at the Kendrick Project Area of the Lance Project in Wyoming.  This approval has been in motion since late 2022 when the company applied to the State of Wyoming Department of Environmental Quality (WDEQ) Land and Quality Division to amend the existing Ross Project Area’s Permit to Mine and Source Materials License to include the Kendrick Project Area as an expansion to the already approved Ross Project Area. The WDEQ has now approved this amendment, granting both the Permit to Mine and the Source Materials License for Kendrick. Note that Kendrick holds an estimated resource of nearly 20.0M lbs U3O8 while current mining from Ross holds an estimated remaining resource of ~6.4M lbs U3O8. In addition, the Underground Injection Control Program Aquifer Exemption request for the proposed injection zone of the Kendrick Project Area has been approved by the U.S. Environmental Protection Agency (EPA). On the production front, uranium recovery operations have been temporarily suspended as management investigates a piping issue within the Central Processing Plant. Updated production plans will be communicated in due course.

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

Earlier in May, the Sprott Physical Uranium Trust announced that it had completed a $25.55M non-brokered private placement at a price of $17.14 per unit (representing a ~9% premium to the unit price). Recall that since the Trust was launched in 2021, it has purchased ~48M lbs of U3O8 and has not sold or loaned a single lb.

Valuation: Given current pricing, SPUT's discount to NAV decreased moderately from last month's -9.4% to the current -8.4% with the Trust now trading at a 0.92x P/NAVPU relative to its intrinsic value of $24.15. Note that following a slight valuation premium in September 2023, the valuation discount has largely been maintained since. The current -8.4% discount ranks well above the near -15.0% discount last seen in February 2023. Given our LT $80/lb price objective for the spot and a constant CAD/USD exchange rate, our 0.95x NAVPU valuation of $26.15 (rounded) is being maintained. For further context, the current -8.4% discount to NAVPU is relative to +26% premium in September 2021 and -18.1% discount from July 2022. YTD shares in U.UN have declined by -11.0%. 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 $72.00/lb (or £53.28/lb), YCA is trading at 0.89x P/NAVPU, or at a -10.9% discount given the current 1.0x NAVPU intrinsic value of £539.71. 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 $80/lb price objective for the spot and a constant GBP/USD foreign exchange rate, our 0.80x NAVPU valuation of £583 (rounded) is maintained. As per YTD performance, shares of the Yellow Cake (YCA.L) have declined by -3.7%. 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 in March, Kazatomprom reiterated FY/2025 production expected between 25.0-26.5 ktU (~65M-69M lbs, 100% basis). This comes amid the current environment in which construction and the procurement of the needed production materials (notably sufficient levels of sulfuric acid) remains challenging. Though Kazakh production has chronically been subject to sulfuric acid shortages, earlier in May, Kazatomprom announced that it had secured a ~$220M line of credit with the Development Bank of Kazakhstan and Taiqonyr Qyshqyl Zauyty to financing construction of a sulfuric acid plant. Worth following these developments closely. Recall that prior to August 2024, production was seen between 30.5-31.5 ktU (~79M-82M lbs, 100%).