The Deep Yellow Limited (ASX: DYL) share price is racing to 8-year highs on Thursday as uranium prices continue to run higher.
At the time of writing, the Deep Yellow share price is up 6.02% to $1.32.
What’s driving uranium prices?
Uranium spot prices have skyrocketed from around US$30/lb in mid-August to US$48/lb by Wednesday, according to S&P Global Platts.
This mostly explains why the Deep Yellow share price has doubled from 60 cents on 20 August.
Uranium prices have boomed thanks to a Canadian fund aggressively buying physical uranium off the spot market.
Sprott’s Physical Uranium Trust, which began trading on the Toronto Stock Exchange in July has amassed more than 25 million pounds of uranium since inception.
According to S&P Global, Sprott received approval on Wednesday of an “expanded equity sales program that will allow the fund to acquire up to $1 billion in additional uranium in the coming months.”
Commenting on the Sprott’s uranium situation, S&P Global said:
One reason offers are rising so quickly is a dearth of currently available material. Multiple market sources have said that Sprott has acquired a lot of U3O8 for delivery in the current month, but also for delivery later as prompt material climbed in price.
The price surge has made inventories more valuable and may spur future production, uranium company officials said.
S&P Global also quoted Paul Goranson, CEO of uranium development company enCore Energy who said:
[Sprott] isn’t going to sell uranium. This is what they do with all their commodities, hold them. The only difference is, uranium is a much smaller market. They’re going to take all the cheap material off the market and sequester it for a very long time.
Deep Yellow share price snapshot
The Deep Yellow share price is up 92% in the past month and 153% year-to-date.
Deep Yellow shares have managed to climb to 8-year highs, broadly coinciding with uranium spot prices hitting 9-year highs on Wednesday.