Vimy Resources eyes US uranium fix

Vimy Resources managing director Mike Young refers to himself as a “silver-lining guy” and jokingly admits “you have to be ... in uranium”. The Andrew Forrest-backed Vimy has a completed definitive study for its $493 million Mulga Rock uranium project 200km east of Kalgoorlie, has two granted mining leases and other key approvals in place. It just needs the price of yellowcake to roughly treble so it can push the button. The spot price of uranium has been in the doldrums since the 2011 Fukushima nuclear disaster in Japan, which prompted a phasing out of nuclear power in western countries, particularly in Europe. Despite several false dawns, sentiment for the commodity has remained stubbornly low for the past eight years. But the forthright Mr Young and Vimy’s chief nuclear officer Julian Tapp are hopeful the market might be approaching an inflection point. They see a looming decision of the US Government as a potential catalyst to move uranium prices higher. President Donald Trump is expected to decide next month whether to introduce trade restrictions to protect US-based uranium producers. The US Commerce Department decided to investigate after two local uranium companies brought a petition under Section 232 of the US Trade Expansion Act in January last year, calling for a 25 per cent import quota. Section 232 was originally introduced in the early 1960s during the height of the Cold War on concerns that the US could be vulnerable on national security grounds to supply disruptions for strategic materials. While the introduction of trade barriers by a country typically represents a threat to companies targeting that market, Vimy has a different perspective. If a quota is introduced, the company is hopeful Australia’s close relations with the US could win the country key concessions as it has done with aluminium and steel. But whatever the outcome, Vimy believes a decision will provide clarity to a market starved of certainty for the past 18 months. US utilities, representing nearly a third of the global uranium demand, have effectively been on a buying strike since the start of last year. Preoccupied with submissions to the Government on the 232, they have been reluctant to enter negotiations with sellers given the lingering uncertainty of the playing field. Mr Young said Vimy expected to begin negotiating contracts in July this year for delivery in 2022, when US utilities are more than 60 per cent uncovered in their uranium requirements. “These guys can’t shut down their reactors, so security of supply becomes a dominant driver for them,” he said. “And if they’re scrambling around trying to find supply at a time when companies have shut mines down and aren’t investing in new ones, you’re going to see a shortage.” Aside from the looming 232 decision in the US, Vimy sees other fundamentals pointing to an uptick in prices. Another big nuclear power user in France has recently delayed plans to reduce its reliance on nuclear energy from 75 per cent to 50 per cent. “Politically, people are now thinking of nuclear as an avenue to emissions-free, dispatchable power 24/7 in all weather conditions,” Young said. “There’s still an anti-nuclear lobby, but by and large mainstream environmental scientists are getting on board nuclear power.” Mr Tapp said demand for uranium was above pre-Fukushima levels, owing to new nuclear power capacity in China and Russia. The respected World Nuclear Association member and former Fortescue Metals Group executive also noted that uranium giants Cameco and Kazatomprom were likely to keep supply restricted until prices rose to about $US60/lb, the price at which Mulga Rock becomes an attractive development proposition.