Uranium prices and uranium stocks spiked in early November after politicians in Japan’s Kagoshima Prefecture, including governor Yuichiro Ito, approved two nuclear reactor restarts in the country.
The restarts at the Sendai plant in Kagoshima, expected in early 2015, mark a return to nuclear power in a country that had all but abandoned it after the 2011 disaster at Fukushima.
Ito’s approval — the final necessary for Sendai’s restart to proceed — was backed by a 38 to 9 vote in the prefecture assembly. The political thumbs-up follows a regulatory approval in September, when Japan’s Nuclear Regulation Authority confirmed that the plant met rigorous safety standards introduced after the Fukushima meltdown.
The news sent uranium’s spot price up 4.3% to US$39.50 per lb. U3O8. At press time it reached US$42 per lb.
Shares in uranium miners and juniors, which rose from a low of US$28.25 per lb. in June, also reacted.
Over several days, Cameco (TSX: CCO; NYSE: CCJ) shares climbed 17% to trade as high as $22.46; Denison Mines (TSX: DML; NYSE-MKT: DNN) popped by 34% to $1.39; Ur-Energy (TSX: URE; NYSE-MKT: URG) rose 32% to $1.20; Uranium Energy (NYSE-MKT: UEC) increased 30% to $1.91; Uranerz Energy (TSX: URZ; NYSE-MKT: URZ) climbed 43% to $1.70; Energy Fuels (TSX: EFR) rose 15% to $9; Uranium Participation (TSX: U) gained 12% to $5.76; and Fission Uranium (TSX: FCU; US-OTC: FCUUF) rose 39% to $1.06.
Noting that the uranium spot price has risen by more than 40% from its June low while uranium equities have, until now, lost ground, Cantor Fitzgerald mining analyst Rob Chang believes stocks could rise.
Chang says in a note that the announcement “is in line with our estimates, and we continue to believe this is yet another positive signalling event for the uranium space, as a significant amount of the current U3O8 inventory is a result of material earmarked for Japan not being used … with low uranium prices not incentivizing additional uranium production and a demand environment that is expected to grow [by 36%], uranium equities are well positioned to move higher.”
None of Japan’s 48 nuclear reactors are online. The Fukushima disaster in March 2011 — when an earthquake and tsunami led to a three-reactor meltdown at the Fukushima Daiichi nuclear plant — had the country re-examining the safety of its nuclear power plants.
At full capacity, Japan’s reactors used 11.5 million lb. U3O8, accounting for 6.4% of global demand.
Cantor Fitzgerald forecasts the two Sendai reactors will restart early in the first quarter of 2015, after operational checks. The investment bank expects nine reactors to restart next year, 10 in 2016 and another 12 in 2017.
Cantor Fitzgerald pegs the global marginal production cost at US$40 per lb. U3O8 — just above the current spot price — but says the long-term equilibrium metal price is US$70 per lb.
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