Peninsula Energy Ltd (ASX:PEN) could benefit from President Trump’s steps to protect domestic production of uranium following the US Department of Commerce’s finding that the nation’s reliance on imports was a national security risk.
The company holds the largest defined uranium resource of any currently producing project in the US at its Lance Uranium Projects in Wyoming, US.
Peninsula has a production guidance of 85,000 – 90,000 pounds of uranium for FY2019 while it is transitioning to a more efficient low pH operations.
Major uranium market catalyst: The section 232 investigation
The US is currently considering the national security implications of excessive reliance on foreign sources for uranium.
Uranium was designated a critical mineral by the Department of Interior as US uranium production is down to its lowest level since 1949.
US mine production in 2019 will be less than 1% of U.S. annual requirements - not enough to power even one nuclear reactor.
The US Department of Commerce completed its report with recommendations in April 2019 and President Trump will make a decision on actions to take by July 13, 2019.
Low pH ISR transformation initiative is being actively advanced
Supply factors favour higher prices
The current market price for uranium is well below the average cost of production globally. The world’s producers cut primary production to 138 million pounds in 2018 which is 30 million pounds less than in 2017.
Primary producers have become significant spot market buyers in lieu of producing with available inventory stockpiles decreasing.
Strong demand fundamentals
The global concern over climate change has led to greater support for expanding carbon-free nuclear power generation.
Nuclear energy growth has pushed demand beyond pre-Fukushima (2011) levels with primary demand estimated at 195 million pounds uranium for CY2019.
Forecasts continue to show primary/utility base demand growth through 2035 with new investment funds buying and holding physical uranium inventories.
Next steps for Peninsula
Imminent share price re-rate events in 2019
• Completion of low pH Permit amendments
o First re-rate event occurred with approval of Permit to Mine Amendment
o Second likely catalyst is nearing with Source Materials License Amendment
• News flow from low pH field trials
• US Section 232 decision