The Rally That Sent Uranium Prices to a 15-year High Isn’t Over Yet
Vancouver, BC
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December 08, 2023 08:30 AM Eastern Standard Time
Uranium prices just hit their highest level in 15 years, capturing investors' attention and confirming analysts' predictions of a long-awaited, major sector rally.
On November 27, weekly spot uranium prices hit $81 per pound, the highest since January 2008, according to UxC. This upward trend is linked to a tightening uranium spot market over the past two to three years, driven by inventory reductions during the pandemic. Mine closures led producers to the spot market, initiating the price surge.
The situation intensified following the entry of the Sprott Physical Uranium Trust (SRUUF) in July 2021, along with other major financial buyers, which has sequestered around 100 million pounds of uranium oxide in the past two and a half years. SRUUF, the world's largest physical uranium fund, held 63.16 million pounds with a net asset value of $5.16 billion as of December 7.
Rising uranium demand is driven by factors like Russia's invasion of Ukraine, leading utilities to stockpile against disruptions, and unexpected needs from projects like California's Diablo Canyon plant extension. Since 2019, the market has faced a supply deficit, exhausting surpluses from 2011's Fukushima incident and pushing prices up due to limited availability.
While Cameco's MacArthur River mine ramp-up has boosted supply, geopolitical events like Niger's coup have disrupted exports, affecting 5% of the global supply. Strong demand for uranium is further fueled by its role in achieving net-zero emissions and geopolitical risks, leading utilities to buy over 150 million pounds in 2023, a record high since 2012.
Weekly uranium prices have already surged nearly 70% year-to-date, but analysts predict more increases to come.John Ciampaglia, CEO of Sprott Asset Management, notes that although current uranium prices are below incentive levels for North American projects, they are boosting revenue and supporting new developments.
Sprott predicts a further rise in uranium prices, driven by increasing demand, utilities' focus on supply security, and growing investor attention. While prices remain below the all-time high of $136 in June 2007, there's optimism for record-breaking highs in the current bullish market.
Among the companies making waves in the uranium market is GoldMining Inc. (NYSE-A:GLDG), which boasts a robust portfolio of projects, substantial cash reserves of $163 million, and zero debt. This company also holds significant equity positions in NYSE and NASDAQ-listed companies and has a joint venture with the world's second-largest uranium producer.
GoldMining Inc.: Unlocking Value and Growth in Resource Markets
GoldMining Inc. (NYSE-A:GLDG), known for its diverse array of gold and gold-copper projects across the Americas, also owns the Rea Uranium Project in Canada's Western Athabasca Basin. This project represents a significant venture into uranium, diversifying the company's mineral portfolio.
GoldMining Inc. (NYSE-A:GLDG) is gearing up to revitalize exploration at its Rea Uranium Project in Canada's Western Athabasca Basin. CEO Alastair Still plans to work with local stakeholders for a phased approach to develop this underexplored asset. Upcoming announcements will detail targeting a significant regional shear zone near the high-grade Dragon Lake deposit.
This exploration strategy is inspired by nearby significant uranium finds like NexGen’s Arrow and Purepoint Uranium Group's Spitfire, suggesting high potential for new discoveries along the same geological zone. These developments could position the Rea Project as a key player in the uranium market.
Another major factor that stands out about GoldMining, which was highlighted in a recent report by CarbonCredits.com, is the company's enterprise value. The Enterprise Value (EV) serves as a key metric for assessing the "takeover value" of a company, reflecting the value assigned to its assets. Right now, GoldMining's EV stands at a modest $29 million, indicating substantial undervaluation according to market dynamics.
To put GoldMining’s value into perspective, the Carbon Credits team explains that it’s important to look at the company’s assets. Consider GoldMining’s La Mina gold deposit. The project is valued at $369 million by third-party engineers, yet the market attributes only $29 million to all of the company’s assets.
This undervaluation becomes even more apparent considering GoldMining's 75% ownership of the Rea uranium project, a substantial venture with Orano, the world's second-largest uranium producer.
Considering the current uranium market dynamics, monetizing the Rea uranium asset could potentially surpass GoldMining's entire EV, given comparable valuations of other uranium-focused companies. This implies that investors essentially obtain all other projects for free.
GoldMining's global resource base includes 12.65 million ounces of gold in the Measured and Indicated category and 13.41 million ounces in the Inferred category. The company strategically acquired these assets at favorable prices during market downturns, exemplifying a contrarian approach.
GoldMining operates four significant businesses:
Cash and Equity Portfolio of $161 million, with holdings in Gold Royalty Corp, US GoldMining, and NevGold.
La Mina Project, carrying an after-tax Net Present Value of $369 million.
Uranium exploration Joint Venture with Orano on the Rea Project, justifying the current enterprise value.
Project Pipeline, including the Whistler gold deposit in Alaska.
GoldMining's diversified portfolio spans Brazil, Colombia, Peru, and North America, encompassing multiple projects with established resource estimates and significant exploration potential. Notably, GoldMining's acquisition strategy during market downturns enabled cost-effective expansion.
The company's second stage involves unlocking value for shareholders by selling, spinning out, or partnering on gold projects. GoldMining Inc. (NYSE-A:GLDG) has no debt, over $160 million in cash, and equity holdings, ensuring financial strength and eliminating the need for dilutive equity financing.
With all-time highs in the spot price of gold and a resource portfolio gaining value as existing mines deplete, GoldMining stands poised for growth. Management and insiders, owning about 15% of the float, demonstrate alignment with shareholder interests. As the energy transition unfolds, GoldMining's strategic plan positions it to capitalize on the increasing importance of resources, offering investors a unique opportunity in a dynamic market.
For further details, click here to explore GoldMining Inc.) (NYSE-A:GLDG).
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