Seeing “durable” demand and “fragile” supply, analysts at Canaccord Genuity remain “constructive” on the outlook for uranium prices fore the remainder of the year.
“Overall, we remain constructive on the outlook for prices,” they said. “In our view, the market will remain in a structural deficit through 2027, and a return to a balanced market will be highly predicated on the advancement of greenfield projects, which remain beset with risks.”
“Demand for nuclear power is more durable than ever … As a low-carbon, reliable source of baseload energy, nuclear power is increasingly being viewed as critical to global decarbonization and energy security. At COP28, over 20 countries launched a declaration to triple installed nuclear energy capacity by 2050. This, among other developments, has led us to upgrade our demand forecasts. We now expect nuclear capacity to grow at a CAGR [compound annual growth rate] of 3.5 per cent through 2035 (vs. 3.2 per cent previously). Key drivers include new reactor builds (in China/India), extensions of operating lives, and restarts of idled reactors. Conservatively, our forecasts do not include the deployment of SMRs; we do, however, highlight recent announcements by major companies like Google and Microsoft that are looking at advanced nuclear as a way to power their AI ambitions.”
In a research report released Tuesday, the firm raised its long-term price to US$90 per pound from US$75-US$80 previously, expecting the reported term price will rise towards spot in 2024 despite volatility early in 2024.
“We have updated our estimates to reflect our latest price forecasts,” the analyst said. “On average, our target prices have increased by 13 per cent. Our preferred equity exposures are NXE and EU in North America; PDN and LOT in Australia; and KAP in the UK. For pure spot price exposure, we like U.UN (SPUT) and YCA.”
With that change, analyst Katie Lachappelle upgraded Texas-based Encore Energy Corp. (EU-X) to “buy” from “speculative buy” previously. Her target increased to $8 from $7, exceeding the $7.76 average.
“enCore Energy is one of our preferred ways to play the uranium space,” she said. “Within a matter of weeks, the company will have two operating mines in Texas. The Rosita plant commenced production in November 2023, and the Alta Mesa project is on track to start production in late April or early May. We project 450,000lbs U3O8 of production from Rosita, and 400,000lbs from Alta Mesa in 2024.
“The profitability of these operations is well protected, in our view. EU has implemented a sales strategy focused on securing a base level of projected income via established offtakes, while also preserving the potential for exposure to the spot market through uncommitted production. To date, EU has signed five utility contracts totalling 4.25mlb U3O8, beginning in 2024 and extending through to 2032 (covering less than 50 per cent of EU’s planned production).”
Target adjustments include:
- Cameco Corp. ( “buy”) to $80 from $72.50. Average: $73.58.
- Denison Mines Corp. (, “speculative buy”) to $3.75 from $3.50. Average: $3.80.
- Fission Uranium Corp. ( “speculative buy”) to $1.75 from $1.40. Average: $2.16.
- Nexgen Energy Ltd. ( “speculative buy”) to $14 from $11.50. Average: $13.54.
- Sprott Physical Uranium Trust ( “buy”) to $35 from $31.50. Average: $36.50.