Microsoft signing an agreement with a major nuclear energy supplier in the US to seek power for its AI projects and data centres has kindled hopes of similar rush elsewhere. Producers of clean, carbon-free energy, already enthused by this development sent uranium stocks into a fizzy.
Nuclear energy is considered to be uniquely placed to the energy demands of the tech sector as it offers a consistent and carbon-free power supply compared to fossil fuel-based alternatives.
ASX uranium shares could become long term beneficiaries if other tech giants resort to this route for their data centres to support AI projects.
Paladin Energy Limited (ASX: PDN)
Paladin Energy Limited has successfully completed the LHM Restart Project, adhering to both budgetary and scheduling expectations, with total expenditures amounting to US$119.7 million.
With the beginning of commercial production at the LHM on 30 March 2024, production increased substantially, achieving the generation of 517,597 pounds of U3O8 by 30 June 2024.
By the end of the quarter, the Company held unrestricted cash reserves of US$48.9 million and had US$80 million in undrawn debt facilities, with US$70 million already drawn.
Subsequent to the quarter's end, the company received a cash payment of US$24.8 million as a partial advance under the customer offtake agreement related to the shipment on 12 July 2024.
The company is placing considerable emphasis on increasing production levels in fiscal year 2025, with a target of generating between 4.0 and 4.5 million pounds of U3O8 from its Langer Heinrich Mine. This enhancement in production capacity is anticipated to significantly boost the company's sales growth in the short to medium term, supported by a robust market demand.
Paladin Energy is also on track to reach a nameplate capacity of 6 million pounds from this project by the conclusion of the calendar year 2025. Furthermore, the company intends to initiate the Pre-Feasibility Study (PFS) for its promising Michelin Uranium Project during fiscal year 2025, with an expected completion by fiscal year 2026. In addition, Paladin is prioritizing advancements in its safety performance. The recent acquisition of Fission is also expected to provide multi-asset production capabilities by 2029, thereby further strengthening the company's long-term growth potential.
Peninsula Energy Limited (ASX: PEN)
Peninsula Energy Limited and its U.S. subsidiary, Strata Energy Inc., recently provided an update on the Lance Project in Wyoming, which is progressing towards a planned operational restart in late Q4 2024.
In August, significant advancements were made in construction, focusing on the Phase II plant expansion, including concrete work and building erection. The project is progressing as planned, with a busy few months ahead as Peninsula aims to become a major uranium producer, responding to the growing global demand for clean energy.
The Lance Projects, situated in Wyoming, USA, encompass the Ross Production Project with an estimated resource of 6.4 million pounds U3O8, the Kendrick Development Project with 19.8 million pounds U3O8, and the Barber Exploration Project holding approximately 32 million pounds of inferred resources. This extensive resource base offers multiple avenues for growth.
The company has successfully transitioned to low-pH in-situ recovery (ISR) methods, which have significantly improved recovery rates. Lance Projects is currently undergoing a Phase II expansion, increasing production capacity from 0.8 million pounds to 2 million pounds per annum. This expansion will enable the independent production of dry yellowcake. The project is forecasted to achieve positive free cash flow by mid-2025, with the first delivery of yellowcake anticipated in Q2 2025.
Peninsula Energy is well-positioned to leverage the robust North American uranium market, which is bolstered by recent US policy changes and international supply constraints. The US ban on Russian-sourced uranium has facilitated $2.72 billion in funding to support domestic nuclear fuel supply, coupled with advancements in nuclear technology and regulatory improvements. Additionally, Kazakhstan’s planned increase in mineral extraction taxes and expected production shortfalls by Kazatomprom highlight international supply challenges.
Peninsula Energy’s production plans align well with market conditions. The company estimates production of 0.7-0.9 million pounds in 2025, increasing to 1.4-1.6 million pounds in 2026 and 2027. The goal is to reach a steady-state production rate of 1.8 million pounds per year by 2029 from its Ross and Kendrick projects. Peninsula has secured six offtake contracts, covering about 40% of its planned production over the next decade, with committed sales of 6 million pounds from 2025 to 2033. These contracts include a mix of fixed and market-linked pricing, offering price protection and flexibility to maximize revenue from future production, including from the Barber and Dagger projects.
Peninsula Energy’s alignment with the expanding North American uranium market, coupled with its proactive approach to securing offtake agreements and addressing supply constraints, underscores its potential for long-term success in the uranium sector.
Source: Company’s Report
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