Are uranium producers around the world moving away from the spot market, and into long-term contracting?
With uranium prices heading up to 12-year highs – linked to the global nuclear renaissance – investors are looking for signals to confirm their bullish momentum thesis in the sector.
Olympic Dam
BHP’s Olympic Dam uranium mine, located in outback South Australia, is a significant location in the global nuclear power supply chain.
The poly-metallic underground mine is home to the largest known resource of uranium in the world, vital to ensuring the western uranium market is supplied. The area is also undergoing significant exploration for copper, uranium and other critical minerals required for the NetZero global economic transformation.
According to some estimates, the mine produces about 6% of the global uranium supply.
In 2022/23, Olympic Dam produced 3,400 tons of uranium per year, or 6.8 million lbs, per page 53 of the 2023 BHP annual report.
With a reported 2023 FY revenue from uranium of US$362,000,000, that would be an estimated sale price of around US$53 per lb.
That is approximately in line with the uranium spot price from July 2022 to June 2023, which hovered from the high $40s – mid $50 per pound across the Australian financial year.
To Spot or to Contract Direct?
However, reports are now suggesting BHP executives have decided to turn to long-term contracting directly to buyers, rather than selling into the spot market.
Word on the street is that BHP, at the insistence of nuclear fuel buyers & traders who need reliable supply contracts, have been entering into long term contracts, so no longer selling #uranium into Spot. Other former Spot selling producers are doing the same to meet demand.🦻🐦
— John Quakes (@quakes99) September 16, 2023
If that proves true, uranium investors believe that the spot price bullishness seen in recent weeks could become even more pronounced.
We’ll have to await confirmation, whatever the case, the uranium bull case continues to rapidly build.
The spot price of uranium is sitting at around US$66 on Friday, September 15 2023 – up from US$59 at the start of the month.
