After a decade of low prices, supply cuts and no new developments, uranium is now in a supply deficit. In order to keep the lights on, nuclear utilities providers are poised to rush into long-term contracts with uranium producers with proven track records.

Lotus Resources Limited (ASX: LOT), an Australian minerals exploration and development company, is heeding the nuclear power market’s calls.

Lotus has a 65% share in the Kayelekera Uranium Project in Malawi, Africa. Although it has been out of production for a number of years, Kayelekera is a proven mine that produced 11 million pounds of uranium over 5 years. Lotus’ scoping study has confirmed the mine has the potential to still deliver a 14 year lifetime based on the current 37.5 million pound U3O8 resource.

“Uranium has been in doldrums for some time but is poised for growth. It comes down to supply not keeping up with demand. In fact, supply is cordoning off. Once utilities start buying, there’s usually a very quick increase in the price going forward, which is good for us,” said Technical Director, Keith Bowes, when he presented on The Insider.

Between 2024-2028, there is an expected supply deficit of 30-60 million pounds per year.  At the same time in the US, the largest consumer of uranium in the world (as at 2018), the current percentage of utility demand covered through long term contracts drops from today’s 91% down to just 8% in 2028.

“The expectation is that US utilities are going to come back very strongly in the market to increase their coverage,” said Keith.

“In the last uranium deficit between 2006 and 2010 of the total amount of uranium sold into long-term contracts more than 754 million pounds were sold at a price greater USD $60 per pound. When you compare that to today’s USD $30 per pound there is obviously plenty of upside to pricing and you would have to expect a significant increase in the spot price which would then allow idle capacity to come back online” he added.

Lotus is in discussions with major nuclear utilities in the US, Canada, Europe and Asia. These were former buyers of Kayelekera product when it was under its former owners. Given the market trust is already there, the Technical Director expects this will pave the way for establishing new contracts too.

“We have a plant capable of producing 2.4 million pounds per annum. 2.4 million pounds per year probably requires 5 to 10 contracts to be place. Based on current discussions with the previous buyers, that’s an achievable target,” said Keith.

“We’ve seen a lot of interest from these utilities in terms of our production plans and how we think we will be able to work with them to meet their required demand.”

Lotus’ Technical Director, Keith Bowes, recently joined us for our fortnightly webcast ‘The Insider: Meet the CEOs’. This article summarises some of the information he shared with us during the session. You can watch a full recording below, or you can click here to book into our next session where we will be joined by TechGen Metals Limited, Pivotal Systems (ASX: PVS) and Zenith Minerals Limited (ASX: ZNC).

‘The Insider: Meet the CEOs’ is a great way to hear directly from the CEOs of fast growing Australian businesses. You will get valuable insights to their industries and companies future prospects.

The Insider: Meet the CEOs – Event Details:

Date: Wednesday, 3rd February Time: 12pm AEDT Format: Online, 3 x 15 minute presentations

This is a free event. Click here to book your spot.

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Sources:

• Proactive Investors, Lotus Resources scoping study demonstrates potential to restart Kayelekera Uranium Project in Malawi
• Reach Markets, The Insider: Meet the CEOs – Lotus Resources (ASX: LOT)
• Statista, Leading uranium consuming countries worldwide 2018