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Editorial Coverage: The world is hearing a growing chorus of
urgency to change the curve of carbon emissions. Calling it a
“climate emergency, “Scientific
American” recently said, “the adverse effects of
climate change are much more severe than expected. . . . Every
effort must be made to reduce emissions and increase removal of
atmospheric carbon.” It will take a concerted global effort to turn
the tide, and nuclear energy is an integral part of the solution.
Nuclear energy has been safely and quietly powering America with
clean, carbon-free electricity for more than 60 years. The most
reliable energy source in the country, nuclear power provides
electricity to about one in five American homes and delivers more
than half of the nation’s carbon-free electricity. Clean, safe and
carbon free, nuclear power has all the attributes needed to help
bend the curve on carbon — except that the United States is at the
mercy of foreign sources for uranium. U.S. production has fallen
to only a
fraction of the uranium needed to fuel even one of the U.S.
commercial reactors. The U.S. has become overdependent on foreign
supplies, with about half of annual requirements now being imported
from countries such as Russia, Kazakhstan and Uzbekistan. These
state-supported uranium mining companies from the former Soviet
Union have been flooding the market with cheap uranium. Unable to
compete, American companies have been forced to idle their plants,
and the country is dangerously close to losing its uranium fuel
industrial base. Recently, however, nuclear has gained government
support and is included as one of the power sources eligible
for a national clean-energy mandate sought by the White House as
part of its Clean Energy Standard. The infrastructure plan could be
a boon for uranium companies. A leading pure-play, production-ready
American uranium company, Uranium Energy Corp. (NYSE
American: UEC) (Profile) has been investing
in the next generation of low-cost and environmentally
friendly in-situ recovery ("ISR") mining uranium projects. UEC
properties are primarily located within the United States, and the
company controls one of the largest historical uranium exploration
and development databases in the country. Others that may benefit
from the government’s clean-energy push could be the iShares
S&P Global Clean Energy Index Fund (NASDAQ: ICLN)
or perhaps an alternative energy company such as First
Solar Inc. (NASDAQ: FSLR), or the electric vehicle
maker Tesla
Inc. (NASDAQ: TSLA) or even a miner like Freeport-McMoRan Inc. (NYSE: FCX),
which supplies raw metals critical to solar and EV
manufacturers.
- America faces a national security threat; the nation imports
almost all its uranium despite operating the world’s largest
nuclear reactor fleet.
- The White House has a goal to “reclaim” domestic uranium
production.
- UEC has amassed the largest resource base of fully permitted
ISR projects of any U.S.-based uranium companies.
- UEC’s projects contain 58 million pounds of U3O8 Measured and
Indicated reserves, with another 45 million pounds in the Inferred
category.
Click here to view
the custom infographic of the Uranium Energy Corp.
editorial.
All Signs Point to Brighter Skies for
Uranium
President Joe Biden has energy on the mind as part of his plan
to bring U.S. infrastructure (currently ranked 13th
globally) on par with its ranking as the
wealthiest nation in the world. As the official White House
website states, “the recent Texas power outages demonstrated,
our aging electric grid needs urgent modernization,” further noting
a Department of Energy study that found power outages cost the U.S.
economy up to $70 billion annually. To that point, the White House
wants to see nuclear as part of the Clean Energy Standard to be
included in “whatever bill
emerges as a vehicle in Congress.”
One of Biden’s first moves in office was to re-join the Paris
Climate Accord, a demonstration of his administration’s commitment
to affect regulations meant to thwart climate change. That’s good
for uranium companies, as the Biden/Harris energy platform
recognizes nuclear as part of critical clean-energy technologies.
Currently, the U.S. production of uranium is virtually nonexistent,
instead primarily relying upon imports to meet demand. That’s an
amazing fact, considering the U.S. operates the world’s largest
fleet of nuclear reactors and has over a billion pounds of proven
and probable uranium reserves.
Clearly, the lack of uranium production in America poses a
national security threat with the utter reliance on foreign uranium
sources to power nuclear plants that supply about 20% of the
country’s total electrical
output and more than half of the nation’s carbon-free power.
During his testimony in March at the Full Committee Hearing on
Nuclear Energy for the Senate Committee on Energy & Natural
Resources, Scott Melbye, Uranium
Energy Corp (NYSE American: UEC) EVP and president of
the Uranium Producers of America, warned that
“America is dangerously close to losing our uranium fuel industrial
base” and that the country must re-establish its once robust
nuclear infrastructure “that has been eroded by Russia, China, and
state-owned uranium entities in recent years.”
For its part, Texas-based UEC is production ready and eager to
provide the much-needed fuel. UEC is vertically integrated with a
processing facility, physical reserves and an impressive portfolio
of uranium mining and exploration projects (uranium, titanium,
vanadium) domestically and abroad, including the largest resource
base of fully permitted ISR projects of any U.S.-based uranium
company. UEC specializes in
ISR mining projects, where the uranium (U3O8) can be extracted
in a more environmentally friendly and cost effective manner than
conventional mining techniques. This process is likely to become a
clear differentiator as the U.S. market re-emerges.
Ready for Strategic Uranium Reserves
Initiative
The DOE’s Office of Energy last year noted that
it is possible to “pull America’s nuclear industrial base back from
the brink of collapse and restore our place as the global leader in
nuclear technology.” The first step in rebuilding is the
establishment of a strategic uranium reserve, sourced through a
competitive bid process that, according to UEC’s president and CEO
Amir Adnani, likely will come with requirements, such as domestic ownership with major
permits in place. The U.S. Uranium
Reserve has been designed as a 10-year $1.5 billion program for
the Department of Energy to buy uranium from domestic producers.
Initial funding of $75 million was authorized by Congress for
fiscal year 2021 purchases.
UEC has four near-term U.S. uranium production projects: three
in Texas and one in Wyoming. The Texas assets are part-and-parcel
to the hub and spoke model that has the Hobson processing plant –
with its 2 million pounds of annual capacity – flanked by the fully
permitted Goliad, Burke Hollow and Palangana projects in the heart
of Texas’ uranium belt. In aggregate, the Wyoming and Texas
projects contain a pipeline of fully licensed, low-cost ISR
projects with a potential production profile of 4M lbs./year. UEC
is currently developing the newest and
largest ISR production area in the U.S. at its Burke Hollow
project in South Texas.
A Bird in the Hand. . .
Seeing the future of uranium, UEC management made the prescient
move to start stockpiling a corporate inventory of physical uranium
with spot purchases below most industry production costs. Earlier
this month, the company secured
705,000 pounds of U.S.-warehoused uranium, with delivery dates out
to December 2022. That was in addition to previous contracts to
acquire 1.4 million pounds of uranium concentrates, giving the
company purchase contracts for a total of 2.105 million pounds of
U3O8 at a volume weighted average price of ~$30 per pound.
The timing of the purchases dovetails with steadily rising
prices for uranium, which now are averaging about $31 per pound
(spot price, long-term ~$35/lb) with projections estimating the
cumulative global supply deficit between production and reactor
requirements is expected to widen from 47 million pounds in 2021 to
almost 250 million pounds over the next five years. As a result,
uranium prices, which reached $138 per pound in 2005 amid mine
disruptions, should continue to rise, especially in the U.S. as it
strives to meet carbon-free energy goals and re-establish an
independent uranium fuel cycle again.
Full Coffers
Back in 2019, UEC added to its asset base with an initial public
offering of Uranium Royalty Corp., raising CDN$30 million in the
process. UEC owns 19.5%, or 14 million shares of URC, which have
seen a nice ascension in value lately to currently trade around
$3.80 each, making UEC’s stake worth about $53.2 million.
Additionally, UEC this month completed a registered direct
offering that raised gross proceeds of $12 million. The influx of
cash has been added to the coffers that now include more than $110
million in cash, equity and inventory holdings. Management says
part of the cash could be used for “additional
uranium purchases”.
Other Ways to Play the Plan
While uranium and a group of well-positioned companies is
certainly one way to capitalize on infrastructure spending, the
plan is quite diverse. The proposal directly addresses reenergizing
the power infrastructure, achieving 100% carbon-free electricity by
2035, creating jobs through electrification of vehicles,
modernizing schools and public transit, and more.
iShares
S&P Global Clean Energy Index Fund (NASDAQ: ICLN)
has been around since 2008 providing investors exposure to
companies that produce energy from solar, wind and other clean,
renewable sources around the world. The fund currently has 37
holdings and net assets of $5.58 billion. In general, clean-energy
funds have been quite popular, as measured by fund flow analytics from ETF Database, which show ICLN
as easily at the top, followed by two other clean energy peers.
First
Solar Inc. (NASDAQ: FSLR) is the only
U.S.-headquartered company among the world’s largest solar
manufacturers and a global provider of responsibly produced
eco-efficient solar modules advancing the fight against climate
change. The panel maker has recently developed its Series 6 CuRe,
the next-generation photovoltaic ("PV") technology that has a
warranted degradation rate of 0.2% per year, the lowest rate for
any commercially available PV product today and up to 60% less than
conventional crystalline silicon produces.
Tesla
Inc. (NASDAQ: TSLA) is the name everyone knows in
electric vehicles, and for good reason. In the first quarter of
2021, Tesla produced just over 180,000 vehicles and delivered
nearly 185,000 vehicles. With respect to the Biden plan, though,
Tesla checks multiple boxes as more of a clean energy ecosystem
than just an electric car maker. Tesla, which spent $2.6 billion to
acquire SolarCity in 2016, has its Tesla Energy division that
CEO Elon Musk has long said goes overlooked as a value driver for
the company.
Freeport-McMoRan Inc. (NYSE: FCX) is
the biggest American-based copper producer and third largest in the
world. Copper is part and parcel to the clean-energy transition due
to its high electrical and heat conductivity and extensive use in
EVs, renewable energies and energy efficient buildings. One of
North America’s largest copper deposits is Freeport’s Morenci mine
in its home state of Arizona. In total, Freeport operates
seven copper mines in North America and produced 1.45 million
tonnes of copper in 2020, trailing only BHP and Codelco.
There will almost certainly be some political posturing with the
$2-plus trillion infrastructure proposal. The final draft may come
out looking a little different than its current form, but there is
plenty of support for what is arguably only of the largest efforts
ever to mitigate emissions by incentivizing clean energy.
For more information about Uranium Energy Corp (NYSE
American: UEC), please visit Uranium Energy
Corp.
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