On April 6, 2021, Uranium Energy (UEC:NYSE) announced that it has secured an additional 705,000 pounds of U.S. warehoused uranium, with delivery dates out to December 2022.
Selling U3O8 is only one prong of UEC's business model.
"UEC is ideally positioned to be the leading supplier of American mined uranium for the domestic utilities and the U.S. government," stated UEC CEO Amir Adnani. "We control the largest resource base of fully permitted ISR projects in Texas and Wyoming of any U.S. based producer, ideally positioned to lead the resurgence in domestic uranium mining."
"We are investing to build the next generation of low-cost and environmentally friendly uranium projects that will be competitive on a global basis," added Adnani.
UEC is a Swiss army knife of uranium-focused investments (it cuts, saws, screws and scissors).
Including the previously announced contracts to acquire 1.4 million pounds of uranium concentrates, UEC now has purchase contracts for a total of 2,105,000 pounds of U3O8 at a volume weighted average price of ~$30 per pound.
In an environment when many resource companies are struggling to raise capital, UEC has a line-up of institutional investors at its door.
In the April 6, 2021, press release UEC announced that is has raised another $12 million at about $3.30 per share.
"Following the closing of the offering and delivery of contracted drummed uranium, UEC will have more than $110 million of cash, equity and inventory holdings," the company announced.
We asked Adnani about his motivation to raise capital now, and how the company is planning to use the funds.
"We are using part of the funds to execute a physical uranium strategy with drummed uranium purchases at market prices that are below most producers cost of production."
"This achieves three objectives," added Adnani:
"1) strengthens our balance sheet as uranium prices appreciate.
2) provides strategic inventory to support future marketing efforts with utilities that could complement production and accelerate cash flows.
3) increases the availability of our Texas and Wyoming production capacity to pursue specific opportunities for uranium of U.S. origin, which may command premium pricing due to the scarcity of domestic uranium production."
We asked Adnani about the macro demand drivers of uranium in 2021.
"Nuclear power is the second largest source of electricity generation in the U.S. and its largest source of carbon-emission free electricity," stated Adnani. "America is also the largest consumer of uranium in the world, yet there is virtually no uranium currently being mined domestically."
"We plan to change that," added Adnani.
"At a time when the White House wants nuclear included in a clean energy mandate, as part of the $2.25 trillion infrastructure plan, the domestic uranium mining industry has excellent growth potential in front of it. There is currently no uranium mining in the U.S. and the 94 operating units in this country make up the largest reactor fleet in the world."
Adnani points out that the global nuclear energy industry continues robust growth, with 53 new reactors connected to the grid since the start of 2013 and another 53 reactors now under construction.
"The global trend towards increased electrification, globally coupled with strong commitments to de-carbonize the energy sector have spurred a greater acceptance of carbon-free, reliable, base-load, nuclear power," stated Adnani.
Nuclear energy now supplies 10% of the world's electricity and is responsible for one-third of global carbon-free electricity. In the United States, nuclear provides 20% of the country's electricity and over 50% of its carbon-free energy.
We asked Adnani to what extent nuclear energy is in competition with renewable sources like wind and solar.
"The main difference between nuclear power and renewables are reliability factors and the large amounts of power nuclear can provide with much smaller land requirements. Nuclear generation provides highly reliable 24-7 base load carbon free power," stated Adnani.
"Nuclear plant capacity factors in the U.S. last year were almost 93%. Contrast that to solar at around 25% and wind at about 35%."
There is also a footprint issue.
Due to the encroachment of suburbs, arable (farmable) land is being lost at the rate of over 38,000 square miles per year.
"Land wise, a comparable wind farm requires about 360 times more land than a nuclear plant," pointed out Adnani.
"A nuclear energy facility requires about 1.3 square miles per 1,000 megawatts of installed capacity. A solar PV facility to match a 1,000-MW nuclear facility's output requires between 45 and 75 square miles.
"While renewables provide carbon free energy, they are subject to mother nature, intermittent, not always available when you need it.
"This is not the case for nuclear energy. If the world is going to reach Paris Agreement goals it will have to have a vibrant nuclear program as part of the overall energy mix.
"We see it as the reliable backbone of a carbon free energy system and a complement to other renewable energy sources."
"China has pledged to increase nuclear power generation to 70 Gigawatts by 2025, from 50GW currently, as part of President Xi Jinping's plans to move away from coal," reports the Financial Times.
"At the same time," added the Times, "President Joe Biden's U.S. administration has said that nuclear will be included in its 'clean energy standard' that would mandate utilities to produce power that is carbon-free by 2035."
Back-of-the-napkin calculations suggest that UEC's 2.1 million U3O8 $30/lb purchase contracts are worth about $60 million.
"Current global developments should drive higher future uranium prices that could eventually support favorable production decisions at one or more properties in UEC's portfolio of assets," wrote H.C. Wainwright & Co. in a March 25, 2021, report.
H.C. Wainwright has a BUY rating on UEC with a price target of $5.00/share.
"Our main objective is to continue adding value to our shareholders and grow the company into the largest and most profitable uranium company in the United States," concluded Adnani.
UEC has 225 million shares outstanding, 246 million fully diluted.
Top shareholders include UEC management and a rock-star list of institutional investors: Blackrock, Vanguard Group, State Street, Fidelity, Northern Trust, UBS, CEF Holdings, Sprott, KCR Fund and Global X Management.
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Disclosure:
1) Lukas Kane compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. He or members of his household own securities of the following companies mentioned in the article: None. He or members of his household are paid by the following companies mentioned in this article: None. His company has a financial relationship with the following companies referred to in this article: None.
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