At the 2015 AME BC Mineral Exploration Roundup, Raymond James analyst David Sadowski spoke to investors about supply and demand fundamentals in the uranium space, as well as the commodity outlook moving forward.
Sadowski explained that in the past the uranium market has overall been inventory driven so much so that production exceeded demand due to the build up of material. Today, however, Sadowski believes that the market has shifted and is balancing out, becoming more of a production-driven market. What that means is that by the end of the decade, a significant deficit in uranium supply is expected.
Its a pretty attractive supply and demand story, Sadowski said, noting, based on that, we expect the uranium price to move to 70 dollars per pound in the next two to three years in order to support these badly needed projects and new mines and this is based on the factors I am describing - global demand growth like the 70s, insufficient mine growth because of the low incentive price, dwindling secondaries as a result of deficit in the year end.
However, of all the activity in the market, there are three key events that market watchers should be aware of, with the first being purchases made by Uranium Participation, the only physically backed uranium fund.
Then there is the case of Coverdyne, a US conversion company, against the US Department of Energy. The firm is suing the DOE on the grounds that it is illegal to dump uranium supply into the market, creating a secondary supply source. Sadowski noted that if Coverdyne is successful in its suit, the uranium market will be even further tightened due to less supply being up for grabs.
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