The Month in U Inventory: Spot Flat as Economic & Geopolitical Uncertainty Weigh on Sentiment

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The spot uranium price ended the month of March essentially flat at -0.4%, settling at $64.25 per lb (Numerco) and off the monthly lows. That said, the price range during the month of March was between $62.88-$65.00 per lb. Despite certain positives from the nuclear re-start/ development front out of Europe, the on-going geopolitical tensions and tariff talk continue to erode investor confidence. As German sentiment continues to warm towards nuclear power, Kerntechnik Deutschland e.V. (KernD), the German Nuclear Technology Association stated last week that restarting the country's nuclear power plants "offers a safe, economically viable and climate-friendly alternative to the current energy policy". The Association went on to add that up to six shut down reactors from the German fleet could resume operation. This comes as uncompetitive electricity costs continue to weigh on the economy. In Sweden, the government proposed loans for the construction of up to 5.0GW of new nuclear capacity. Companies may start applying for these loans beginning in August 2025. Sweden previously stated aims for 2.5GW of new nuclear generating capacity by 2035. Lastly in Poland, President, Andrzej Duda, signed a bill last week authorizing construction funding for the country's first nuclear plant (AP100 technology). The new plant will target commercial production by 2033. Poland aims to build 10 new nuclear reactors by 2045.

On the corporate front, Paladin Energy (PDN) announced that following the suspension of Langer Heinrich uranium production as announced on March 21, production has since been restored. The temporary suspension was due to the unseasonal rainfall which greatly impacted operations. Though operations have now been restored, FY/2025 production guidance was withdrawn (previously expected between 3.0M-3.6M lbs U3O8). On the exploration front, NexGen Energy (NXE) announced the best drill hole intercept drilled to date at  the Patterson Corridor East (PCE). Drill hole RK-25-232 intersected a broad zone of intense mineralization highlighted by 3.9M of >61,000 cps. This is one of the shallowest and most high grade intersections ever drilled on PCE. That particular drill hole has substantially expanded the shallow inner high-grade subdomain. That particular intersection remains open in all directions.

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

Valuation: Given current pricing, SPUT's discount to NAV decreased moderately from last month's -9.6% to the current -9.4% with the Trust now trading at a 0.91x P/NAVPU relative to its intrinsic value of $22.68. Note that following a slight valuation premium in September 2023, the valuation discount has largely been maintained since. The current -9.4% 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 -9.4% 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 -17.4%. 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 $64.25/lb (or £49.67/lb), YCA is trading at 0.83x P/NAVPU, or at a -16.8% discount given the current 1.0x NAVPU intrinsic value of £503.85. 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 -16.3%. 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. Recall that prior to August 2024, production was seen between 30.5-31.5 ktU (~79M-82M lbs, 100%).