Shares of Canadian uranium producers have seen a significant increase following a warning from NAC Kazatomprom, the world's largest producer of uranium, regarding production challenges.
The stock of Cameco has risen by 8.5% to 67.84 Canadian dollars ($50.65), while NexGen Energy has gained 10% and Global Atomic has risen 11%. Uranium Royalty has experienced the most significant increase, with shares climbing 17%.
Kazakhstan's state uranium company has cited difficulties in obtaining sulfuric acid, as well as delays in completing construction works at newly developed deposits, as reasons why reaching production targets for 2024 could prove challenging.
Sulfuric acid plays a critical role in the extraction of uranium. It is primarily used in conventional mines, where the ore is crushed and ground before being leached in sulfuric acid tanks to dissolve the uranium oxides prior to extraction.
According to Scotiabank analyst Orest Wowkodaw, Kazakhstan is expected to produce 60 million pounds of uranium in 2024 and 80 million pounds in 2025, accounting for 39% and 41% of global primary supply, respectively.
Wowkodaw also mentions that if there is a production shortfall, NAC Kazatomprom may need to enter the market to purchase spot material in order to fulfill its customer obligations and meet its 2024 delivery obligations.
Kazatomprom has stated that its 2025 production targets could also be compromised if the supply does not improve throughout the year and construction works timelines are not met.
The demand for uranium has increased as the world shifts away from carbon-emitting fuels. As a result, uranium prices have more than doubled over the past year, with the current spot price sitting at $97.45 per pound.
If Kazakhstan's production decreases, Canadian producers could potentially benefit from the market situation.