The Month in U Inventory: Term Price Remains at a Record High in September

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Spot uranium was essentially flat during the month of September as it ended the month at $89.38 per lb (Numerco) given a tight range between $89.38-$90.25 per lb for the month. At time of writing, the term remains at $96 per lb, representing an increase of nearly +11% YTD. More importantly, the $96 per lb quote represents the latest all-time high, surpassing the $95 per lb high last seen in 2008. Though term pricing has been supported by stronger year on year 1H/2026 contracting (32.5M lbs vs 27.0M lbs) we note however that term volumes remain below the past 5-year average. That said, the Sprott Physical Uranium Trust (U-U, U.UN) did not add to inventory during the month as the figure remained just under the 81.7M lb U3O8 level. The current inventory figure represents a notable ~4.4x increase to the 18.3M lbs held nearly four years ago when the Trust was launched, post Uranium Participation Corp. acquisition. Yellowcake PLC (YCA) as well did not add to it's ~24.4M lb inventory.

We note that the mood was upbeat at the World Nuclear Symposium held in London, earlier in September. On back of the announced U.S.-Korean partnership working towards a framework to construct 8 new large nuclear reactors in the U.S., we continue to see country-level government ambition supporting the ambitious goal of tripling nuclear capacity to ~920GW (high case) by 2050. We note that capacity under construction has increased from 76GW to 82GW y/y while planned capacity has increased from 104GW to ~114GW y/y. On the contracting front, we note that though both the uranium spot and term have ticked higher of late, term volumes remain stubbornly below the past 5-year average. Though there is less clarity on the supply side (conversion, enrichment, fabrication) this current contracting dynamic won’t be able to hold given the current fundamentals and shifting attitudes.

On the corporate front, earlier in September, Global Atomic (GLO) announced that the U.S. International Development Finance Corporation (DFC) approved financing of up to $414M for its uranium project in Niger. Known to host one of the highest grade uranium mines in Africa, construction on the Dasa Project is expected to be completed sometime in 1H/2028 with commissioning planned for 2H/2028. We note that the approved financing is materially higher than initially expected and includes over $100M for any possible capex inflation. We note that over the years Dasa has been plagued by years of political instability in Niger along with constant capex creep. A mining export route from Niger must also be finalized.

Elsewhere, Westinghouse Electric Co. (jointly owned by Brookfield Renewable Partners (BEP-UN) and Cameco Corp (CCJ, CCO)) announced that it is targeting a public filing as soon as in October. A syndicate of investment banks have been selected for the listing with Westinghouse targeting a valuation of $50B for the IPO.

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

Earlier in the year the onset of the Iran war and the the recent AI driven market downturn reversed earlier P/NAV premium valuations seen earlier in the year, to steep discounts. The Trust reached a -12.3% discount to end the month of July. Recall that the Trust was at par to NAV at the start of March (pre-war) and even reached a premium of +9% in late January. Though no inventory was added during the month, the current 81.697M lb inventory figure represents a notable 4.4x 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 -7.0% to the current -12.6% discount with the Trust now trading at a 0.87x P/NAVPU relative to its intrinsic value of $30.43. Note that following a slight valuation premium in September 2023, the valuation discount has largely been maintained, apart from a brief period this January. The current -12.6% discount ranks near the -15.0% discount last seen in February 2023. Note that a premium of +9% was achieved before the sell-off at the onset of the Iran war. 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 -12.6% 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 +0.8%

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

Valuation: Given the most recent spot U3O8 quote at $89.38 per lb (or £67.04 per lb), YCA is trading at 0.82x P/NAVPU, or at a -18.1% discount given the current 1.0x NAVPU intrinsic value of £662.67. Given our LT $100/lb price objective for the spot and a constant GBP/USD foreign exchange rate, our 0.80x NAVPU valuation of £710 (rounded) is maintained. As per YTD performance, shares of the Yellow Cake have declined by -8.4%. 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). Kazatomprom has maintained its FY/2026 production guidance of 28,250 tU (mid-point) however longer term production will be impacted given that commissioning for the TQZ acid plant is expected to commence much later - now seen sometime between Q3/2027 and Q1/2028.