The Month in U Inventory: U3O8 Production Ramps Higher as the Trust Keeps Adding Inventory

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The spot uranium price ended the month of July -9.5% lower, settling at $71.25 per lb (Numerco). That said, the price range during the month was between $70.75-$77.88 per lb. The price decline during the month essentially reversed the +9.5% monthly gain seen during the previous month in June. Following the bought deal for 11.6M units announced in May, the Trust has continued to systematically add to its uranium inventory: 1.45M lbs were added in June, a further 750,000 lbs were added in July. The Trust now holds just over 68.4M lbs in inventory. This represents a notable 3.5x increase to the 18.3M lbs held just four years ago when the Trust was launched, post Uranium Participation Corp. acquisition.

As announced in late July, Kansai Electric Power Corp. (Kepco) laid out plans to build a next generation nuclear power plant in Fukui Prefecture. Currently, preparations are being undertaken for the preparation of a geological survey. If the ground is deemed to be acceptable, Kepco will submit an application to the Nuclear Regulation Authority to begin construction. Recall that though Kepco initially began a feasibility study for the new reactor in 2010, plans were suspended in the aftermath of the 2011 Fukushima disaster. This announcement is meaningful as it represents the first Japanese proposal for a new reactor, post-Fukushima.

On the corporate front, largely attributed to significant tailwinds from Westinghouse, Cameco (CCJ) posted adjusted net earnings of $308M on adjusted EBITDA of $673M which were significantly higher compared to Q2/2024 and topped consensus expectations. On back of major construction activities on two reactors in the Czech Republic, Westinghouse swung from a net loss in Q2/2024 to net earnings of $126M (CCJ’s share) this quarter. Moreover, on the fuel services front, adjusted EBITDA increased by 36% compared to the same period in 2024 largely due to higher sales and a decrease in cost of sales. JV Inkai continues to target 8.3M lbs (CCJ’s share) for the year. Ultimately, FY/2025 outlook was reiterated, while the outlook for Westinghouse was improved significantly. Elsewhere, Kazatomprom (KAP) recently announced a +14% y/y increase in quarterly production as 9.01M lbs U3O8 was produced in Q2/2025 (KAP’s share). Company production guidance was reiterated between 64.99M-68.89M lbs (100% basis) for FY/2025. This comes as in early July, the company's JV with Orano launched a new processing plant, thus successfully implementing the South Tortkuduk project. Domestically, Ur-Energy (URG) noted progress from Lost Creek as during the quarter, 112,033 lbs U3O8 were dried and packaged. This marks a +35% increase compared to Q1/2025. Production has also been ramping higher at enCore Energy's (EU) Alta Mesa. As announced in late June, uranium capture for the first 22 days of June 2025 averaged 2,410 lbs of uranium per day for a total of 53,022 lbs. This is a marked increase from the average of 1,94b lbs captured per day in April and the 2,103 average figure captured per day in May. Lastly, the McClean Lake JV (between Orano and Denison Mines (DNN)) announced the start of the Surface Access Borehole Resource Extraction (SABRE) method. A total of 250 tonnes of high-grade ore (10+% U3O8) was recovered from the first mining cavity.

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

With the addition of 750,000 lbs purchased in July, the Trust now holds just over 68.4M lbs in inventory. Recall that since the Trust was launched in 2021, it has purchased ~49M lbs of U3O8 and has not sold or loaned a single lb.

Valuation: Given current pricing, SPUT's discount to NAV increased from last month's -5.7% to the current -6.9% with the Trust now trading at a 0.93x P/NAVPU relative to its intrinsic value of $23.96. Note that following a slight valuation premium in September 2023, the valuation discount has largely been maintained since. The current -6.9% 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 -6.9% 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 -10.3%. 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 $71.25/lb (or £54.15/lb), YCA is trading at 0.89x P/NAVPU, or at a -10.7% discount given the current 1.0x NAVPU intrinsic value of £548.60. 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 -2.0%. 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 recently reiterated its FY/2025 production expectations being 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%).