Our Q&As are emailed in our Saturday Morning Report, find the answer to this question below.
We’ve all watched the rise & rise of the spot price to around US$95/lb over the last 2+yrs. However over 70% of uranium sold is via LT contracts and while the LT will generally follow the spot prices higher (with a lag), currently LT contracts settle around US$70/lb. What is the strength of the link between LT & spot prices? Can we better select uranium investments based on such variables and their production or startup cycle?
Hi Glenn,
This is a really good question, and different producers will have different views around contract pricing. At the extreme, Cameco (CCJ US) has contracts in place for more Uranium than they currently produce, and rising prices can actually be a negative for them, although there are a few offsets here. On the other hand, Paladin’s (PDN) offtake contracts leave them well exposed to strength in the spot uranium price – according to company guidance, about 80% of its sales offer uncapped exposure to the uranium price out to CY2030 – one of the reasons this is our No 1 pick in the space with MM being bullish on the commodity moving forward.
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