China and Japan targeted as the next export markets
The Australian mining company, A-cap Resources last week indicated that its envisaged Letlhakane uranium mine could start production and exporting into the international market after 2022, in line with the updated projections in increase in uranium prices in the international market.
After initial projections that the prices could increase by more than 50% between 2017 and 2018 and that the construction of the mine would start by 2018, the company last week provided new timelines on the projected recovery in uranium prices and opening of the mine.
Updated projections from the company show that the uranium market will start recovering from the state of oversupply after 2018 and the prices are expected to have increased by around 50 percent from around US$35/lb recorded this year to US$80/lb in 2022, a trend which has compelled A-cap to reschedule its production timeline. “The demand and supply crossover point for uranium appears to have been pushed forward according to consensus forecasts therefore it is important to align our forecast production horizon with an increasing uranium price and improved market,” stated the company.
A-cap stated that according to Investment bank Cantor Fitzgerald, by 2022 the uranium price will increase to US$80/lb and this is expected to motivate production. “The sentiment is supported by RBC Capital Markets in their Q3 2017 Market Outlook which forecasts that the price of uranium will gradually increase from 2019 and significantly from 2022 as the market enters a supply deficit and uranium inventories are drawn down,” states the company.
In the updated data on the expected nuclear projects, the company revealed that as of 1st August 2017, there were 58 nuclear reactors under construction, 162 reactors planned and 349 proposed and indicated that management remain hopeful that forecast uranium demand will be driven by Chinese rector build coupled with the expected Japanese rector restarts. China accounts for 20 of reactors under construction and over 40 percent of proposed reactors, according to the company.
The company’s board chairperson Angang Shen last week told A-cap shareholders that following difficult trading conditions and delays in recovery of uranium market, China is expected to boost demand for uranium and help prices to recover. “China is committed to a clean energy future and currently has 20 nuclear power plants under construction. Chinese nuclear technology currently leads the world and the country is also exporting the technology abroad and I believe that this long-term commitment by China in advancing the best clean-energy option will bode well for the future uranium demand,” he said.
He emphasized that A-cap remains committed to move the project into production and added that the company is positioned to take advantage of the Chinese market. “Throughout 2017 the company has continued to remain focused on developing Letlhakane Uranium project. A-cap is in a fortunate position to have two substantial Chinese shareholders, Ansheng Investment Co Ltd and Jiangsu ShengAn Resources Group Co Ltd, who both share the China vision for a commitment to a clean energy future through the development of world class nuclear technology and the construction of nuclear power plants within China and overseas,” said Shen.
He indicated A-cap remains well funded to meet the cost of relocation to prepare for development of the mine and added that the company will raise more funds for construction of the mine and production to take advantage of the projected recovery. He stated that to prepare for the construction of the mine and uranium production, environmental consultants Ecosurv have been engaged to carry out a relocation process and the process is on-going and will continue throughout 2018 financial year. Government has reserved 144 square kilometers of land to the company for construction of the mine and other activities related to the project and according to Tonota sub land board the land will be allocated to the company upon compensation to the relocated communities in the project area. The company could not ascertain the amount of compensation to the affected communities, and noted that the sub land board commenced calculating the number of properties and infrastructure belonging to the community and an asset evaluation has also started.
The company has indicated that the delay in price recovery does not have an impact on the company financials and added rather it allows the entity to have time to identify risks factors that could negatively affect project economics.