ASX uranium shares could be a mover on Tuesday after the world’s largest uranium producer, Kazatomprom, announced plans to participate in a physical uranium fund.
Kazatomprom, the national atomic company of Kazakhstan, contributed approximately 23% of global primary uranium production in 2020.
According to World Nuclear News, Kazatomprom’s fund will hold physical uranium as a long-term investment, with an initial US$50 million of purchases financed by its founders.
Once the fund is operating, the company plans an additional public or private offering to raise up to US$500 million for additional uranium purchases.
The timing and details of this second development stage will be determined by market conditions, Kazatomprom said.
The company believes the global transition towards clean energy and, more specifically, nuclear power, provides a “strong investment thesis” for the uranium industry.
Opportunities for uranium exposure have been scarce, with two uranium funds being the Sprott’s Physical Uranium Trust listed on the Toronto Stock Exchange and London-based Yellow Cake.
Why is this a big deal for ASX uranium shares?
Sprott Asset Management and its Physical Uranium Trust has been viewed as a major driver behind the recent surge in uranium prices.
The fund began trading on the Toronto Stock Exchange in July. It now holds more than 30 million pounds of physical uranium.
Its strategy is simple — aggressively buy physical uranium off the spot market which tightens supply.
By mid-September, uranium prices briefly crossed US$50/lb for the first time in 9 years.
Now the world’s largest uranium producer has its eyes set on accumulating its own stash.
While the funds are busy taking uranium off the spot market, the supply of uranium remains constrained.
In August, Kazatomprom announced it will extend its 20% production cut through to 2023.
“Although the uranium market is starting to show signs of improvement, including an increase in long-term contracting interest, a thinning spot market, and slightly improved pricing, we still find ourselves in a position where adding tonnes back into the market in 2023 would be unlikely to maximise returns for our shareholders,” said Kazatomprom CEO Galymzhan Pirmatov.
This could act as another tailwind for ASX uranium shares, especially following recent government interest in nuclear energy.