Uranium giant in talks to supply Sprott as investor demand soars

Top uranium miner Kazatomprom said it may supply the metal to Sprott Inc., the investment firm whose aggressive bets on the market have helped drive a surge in prices.

“We already started talks with Sprott,” Askar Batyrbayev, chief commercial officer of the Kazakh producer, said in an interview. “A lot of financial players” are increasingly interested in uranium, from the Middle East to Singapore and Hong Kong, he said.

The radioactive metal, used to fuel nuclear plants, has soared to the highest price since 2014 due in part to Sprott’s buying spree. The firm’s physical uranium fund has boosted its stockpile by 45% in four weeks, potentially tightening the market and putting pressure on utilities and other consumers.

Any contract with Sprott will reflect Kazatomprom’s long-term view of supply and demand, Batyrbayev said. It would be for deliveries starting in 2022, since the miner will be buying from the market this year rather than selling, he said.

“There is a small risk that we won’t reach our planned output target” in 2021, according to Batyrbayev, who said the company will know whether it will meet production forecasts by the end of the third quarter. 

Earlier this year, Kazatomprom said it would keep output capped through 2023, waiting until a “sustained market recovery is evident” and fundamentals improve. Prices have since rocketed, climbing 40% this month, though the company said demand is coming from financial investors rather than utilities.

Sprott wasn’t immediately available to comment. 

To be sure, there is competition for Kazatomprom’s supplies, with the producer also in talks with China to help build the country’s strategic stockpiles — designed to hold 23,000 tonnes by 2026 — Batyrbayev said. An agreement with the Asian nation — potentially leading to deliveries from next year — may mean lower sales to financial investors, he said.

Investor demand

Yellow Cake Plc, another investment firm, exercised an option earlier this year to buy the metal from Kazatomprom. It also purchased additional volumes from the company as well as “small” amounts from the market, according to Batyrbayev. 

“I believe they will use their next-year option volumes on Jan. 1 all at once,” he said.

As far as utilities are concerned, Kazatomprom doesn’t expect a rush for more deliveries in the next couple of years. While Sprott may “buy, buy, buy,” it’s “highly unlikely” that utilities will sign new contracts soon, with discussions more likely focused on supplies in 2024 and 2025, according to Batyrbayev.

“Utilities have good enough uranium stocks for the next three years,” the executive said. “We don’t expect big requests from energy companies to buy uranium in 2022 to 2023; that determined our decision on 2023 production.”

(By Nariman Gizitdinov, with assistance from Stephen Stapczynski)