Sprott Asset Management : The Biden administration recently announced a $4.3 billion plan to buy enriched uranium directly from domestic producers, causing uranium related stocks to see a major jump in price.
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John Ciampaglia, Chief Executive Officer of Sprott Asset Management
John Ciampaglia, CEO of Sprott Asset Management, which recently listed the Sprott Global Uranium Miners UCITS ETF (LSE: URNM) comments:
“While Russia only provides 15% of global uranium production which is the feedstock for nuclear fuel, it accounts for a significant amount of global capacity in the nuclear fuel cycle with 27% of conversion and 39% of enrichment service capacity. Western utilities are trying to source alternatives to Russian conversion and enrichment services but there is currently a lack of capacity available in the West because of curtailments and closures of facilities following a period of uneconomic pricing.
The Western convertors and enrichers will not ramp up production without long term contracts in place from utilities. Even if the contracts are signed, they also need time to bring capacity back on line. In the interim, there is also a threat that Russia cuts off these services from the West.
The U.S. government has recognized these supply chain risks, prompting the Department of Energy to request funding from Congress to assist with the transition to domestic solutions. Details have yet to be released but the signal it sends is very clear – the U.S. wants its utilities to migrate away from Russian nuclear fuel services. We believe the U.S. also wants to revive domestic production of uranium as most mines are no longer operating due to a protracted period of low uranium prices. The U.S. nuclear reactor fleet requires about 50 million pounds of U3O8 uranium annually to operate and domestic production was only 21,000 lbs in 2021. These idle U.S. mining operations will come back on line but only with a higher incentive price for uranium along with long term purchase contracts with utilities.”
Source : ETFWorld.co.uk
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