Uranium companies have separately announced plans to make strategic purchases of physical uranium. Denison is aiming to buy about 2.5 million pounds U3O8 (962 tU) through the spot market as a long-term investment, while Uranium Energy Corp (UEC) has entered into agreements to purchase 400,000 pounds. UK-based Yellow Cake plc has also announced further purchase plans under its agreement with Kazatomprom.
Toronto-based Denison said yesterday it had entered into a strategic financing agreement with Cantor Fitzgerald Canada Corporation to raise about USD$75 million, which will be used to fund the strategic purchase of uranium concentrates to be held by Denison as a long-term investment intended to support the potential future financing of the advancement and/or construction of its 90%-owned Wheeler River uranium project in Saskatchewan, Canada. The purchase is expected to strengthen the company’s balance sheet and enhance its ability to access future project financing.
The purchased uranium could also provide increased flexibility for Denison to negotiate long-term uranium supply arrangements with future customers, it said. Its physical uranium holdings will eventually be marketed to its future customers along with the mine production from Wheeler River, should a future decision be made to advance the project to construction.
Denison President and CEO David Cates said the physical uranium holdings will represent a “sizeable portion” of Denison’s share of the expected CAD290 million initial capital costs for Wheeler River.
“As a result, we expect this transaction to enhance the long-term financial stability of the company, as we advance towards a definitive development decision. From a project finance standpoint, the physical uranium holdings could potentially de-risk the process by representing a meaningful source of collateral. Similarly, we expect that our future customers will value, as part of potential future discussions regarding off-take or long-term contracting arrangements, the fact that our company will already have a sizeable base of physical uranium before achieving first production from Wheeler River,” he said.
With the transaction, Cates said, Denison has “broken the conventional equity dilution model for mining development companies – as our shareholders will benefit from the additional financial stability of our Uranium holdings, while remaining fully leveraged to any future appreciation of uranium prices during the balance of the environmental assessment and feasibility study processes currently planned for Wheeler River.”
Unique opportunity
US uranium producer UEC today announced its plans to establish a physical uranium inventory “to take advantage of spot purchases below most industry production costs.
“Holding an inventory will also provide “greater marketing flexibility” while freeing up production from the company’s domestic mines production for the US Uranium Reserve, and “other US-origin specific opportunities,” the company said.
UEC CEO and President Amir Adnani said the Texas-based company is investing to build the next generation of low-cost and environmentally friendly uranium projects.
“Despite our focus on low cost in-situ recovery mining with its low capital requirements, we see a unique opportunity to purchase drummed uranium at prevailing spot prices which are below most global industry mining costs,” he said. “Hence, we are establishing a physical uranium inventory initiative and have entered into initial agreements totalling USD10.9 million to purchase 400,000 pounds of US warehoused uranium at our account with the ConverDyn facility in Metropolis, Illinois.”
This initiative, he said, will support three objectives: to bolster UEC’s balance sheet as uranium prices appreciate; provide a strategic inventory to support future marketing efforts with utilities that could compliment production and accelerate cashflows; and increase the availability of production capacity from the company’s Texas and Wyoming operations “for emerging US origin specific opportunities which may command premium pricing due to scarcity” such as supplying the US Uranium Reserve.
Establishment of the reserve was recommended in April 2020 by a presidential working group tasked with analysing national security considerations with respect to the entire nuclear fuel supply chain.
Yellow Cake increases holdings
Yellow Cake, which specialises in buying and holding physical stocks of uranium, yesterday said it has informed Kazakh uranium company Kazatomprom that it has elected to exercise its full 2021 USD100 million uranium purchase option and expects to take delivery of the 3.5 million lb of U3O8 at Cameco’s Port Hope/Blind River facility in Ontario, Canada between April and August this year. This follows the completion of a USD140 million share placing earlier this month.
The company has also agreed to purchase a further 440,000 pounds U3O8 at a price of USD27.34 per pound for total consideration of USD12 million, it said, taking delivery later this month. These purchases will increase Yellow Cake’s U3O8 holdings from 9.3 million to 13.2 million pounds U3O8. “To the extent that additional uranium can be sourced for value, Yellow Cake intends to continue with further uranium market purchases,” it said.
Yellow Cake has the option to purchase up to USD100 million of U3O8 per year from Kazatomprom at an undisturbed spot price under a framework agreement between the two companies.
“We believe there is a clear shift in sentiment around the outlook for uranium,” Yellow Cake CEO Andre Liebenberg said. “Significant investor demand enabled us to considerably increase the size of the share placing. We now see real opportunity for shareholders to benefit from the pending rebalancing of the uranium market. The larger placing also provides strategic benefits to Yellow Cake.”
Source: World Nuclear News
