The Peninsula Energy Ltd (ASX: PEN) share price is advancing today following the overnight United States Omnibus budget approval. During late morning trade, the Peninsula share price rose as high as 11.5 cents. However, the uranium mining company's shares have since partially retreated to 11 cents, up 10% for the day.
Let's take a look at what is moving the Peninsula share price today.
What's driving the Peninsula share price?
The Peninsula share price is on the rise today after the company advised the United States President Donald Trump signed off on the Omnibus budget bill. The approved spending package will see the US Department of Energy allocate US$75 million towards the establishment of a national strategic uranium reserve.
Under the American Nuclear Infrastructure Act (ANIA), the US Department of Energy will be restricted to only buy uranium recovered from facilities licenced by the Nuclear Regulatory Commission. This, in turn, not only strengthens the domestic uranium market, but also preserves the US' nuclear fuel supply chain.
Nuclear fuel can be harnessed in power stations to produce electricity without emitting carbon dioxide, a greenhouse gas that causes climate change. While the main ingredient for nuclear fuel is uranium, most utility companies are sourcing the product from other countries. The reason for this is that overseas uranium companies often deflate prices, making it difficult for US companies to compete.
According to the US Energy Information Administration, 90% of uranium purchased by US nuclear power reactors comes from outside the country. This affects demand with US nuclear power producers having suffered over the past decade, lagging behind overseas competitors.
The new act gives the Nuclear Regulatory Commission the ability to block imports of uranium from Russia and China. This is seen as a way to not only protect national security interests, but also the domestic uranium mining sector.
How does this affect Peninsula Energy?
While only a handful of companies will be able to supply material into the uranium reserve, Peninsula's wholly owned US subsidiary, Strata Energy, is one of them.
With uranium operations in Wyoming, the company believes the recent bill approval will provide significant opportunities for it moving forward. According to Peninsula, its Lance projects have the production facilities to accommodate the US Department of Energy's needs.
This would supplement the company's existing portfolio of uranium sale contracts, which total up to 5.5 million pounds of uranium to be delivered until 2030. It is estimated that the weighted average future sales price of uranium is US$51 to US$53 per pound.
What did management say?
Peninsula managing director and CEO Mr Wayne Heli commented:
Creation of a uranium reserve is truly a ground- breaking initiative for our industry and our nation. The reserve program will go a long way toward supporting and expanding the domestic production of nuclear fuel in 2021 and beyond.
We look forward to working with the U.S. DOE to ensure this funding strategically supports established production companies with permitted facilities and infrastructure. The budget approval, and other recent bipartisan legislative actions recognize the importance of nuclear energy in the generation of baseload, carbon-free electricity.
Peninsula share price snapshot
The Peninsula share price is down over 25% since this time last year. Having reached a 52-week high of 19 cents in April, its shares have failed to reach anywhere near that mark over the period since then.
Based on the current Peninsula share price, the company commands a market capitalisation of around $94 million.
