Long-term uranium contract prices have surged to over 16-year highs, driven by supply uncertainties and increasing demand, as the industry scrambles to prepare for powering AI data centers. Other factors, such as supply chain disruptions, geopolitical uncertainties, and environmental mining restraints, contribute to the situation.

Term prices for uranium now hover around $79 per pound, the highest since 2008, with further increases anticipated in the coming months.

"With a stronger market environment, we're currently locking in ceilings of about $125-130/lb and floors at about $70-75/lb in market-related contracts," said uranium miner Cameco (NYSE:CCJ), per a Reuters report.

Over the past year, spot uranium prices have risen nearly 88%, reaching a 14-year high of about $82 per pound in February 2024. The rapid increase in spot prices began in 2022, with a notable 41% rise to $49.81 per pound.

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The demand for uranium is anticipated to grow substantially. The International Energy Agency (IEA) has predicted that nuclear generation could almost double by 2050 due to the global push for clean energy. This would necessitate a corresponding doubling of uranium supply, which seems challenging given the current market conditions.

They estimate that uranium prices need to be at least 30% higher than the current marginal production cost of $90-$100 per pound to incentivize new projects, suggesting that supply shortages may persist over the next decade.

According to a May 2024 Goldman Sachs Research report, global data center power demand, which currently accounts for 1-2% of total electricity consumption, is expected to grow by 160% by 2030. Such a surge, accompanied by the push for clean energy, is a positive catalyst for a higher share of nuclear power in the energy grid and, consequently, the demand for uranium.

Australia's recent decision to ban mining at the Jabiluka site, one of the world's largest high-grade uranium deposits, doesn't help the supply side. The Jabiluka deposit, discovered in the early 1970s, has been central to legal and cultural disputes between Indigenous custodians and mining companies. However, the Australian government announced the extension of Kakadu National Park to include the Jabiluka site, effectively prohibiting any future mining activities.

Energy Resources of Australia (OTCPK: EGRAF), a company majority-owned by Rio Tinto (NYSE:RIO), previously held mining leases at Jabiluka.

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