The Deep Yellow Ltd (ASX: DYL) share price is rising on Tuesday morning.
At the time of writing, the ASX 200 uranium stock is up 7% to 86.5 cents.
Why is this ASX 200 uranium stock charging higher?
Investors have been buying the company's shares this morning after it provided an update on its flagship Tumas uranium project in Namibia.
While many investors were hoping for a green light on full-scale development, Deep Yellow has instead opted for a more patient and strategic path forward — and it might just pay off in the long run.
According to the release, Deep Yellow has confirmed that it will proceed with a staged development approach at Tumas, pushing forward with early infrastructure and detailed engineering. However, the all-important construction of its processing plant — the biggest slice of the project's capital spend — has been put on hold due to weak uranium prices.
The ASX 200 uranium stock's managing director, John Borshoff, said:
We are at an extraordinary stage in the uranium supply sector. We have a situation where the long-term uranium market is essentially broken. This is due to more than a decade of sector inactivity, persistently depressed uranium prices, and utility offtake contracting practices which are yet to support the development of greenfields uranium production.
Although the Tumas Project is economic at current long-term uranium prices, these prices do not reflect or support the enormous amount of production that needs to be brought online to meet expected demand. Also, we can expect from experience that supply shortages will only be exacerbated by likely delays and underperformance of the sector generally.
In light of this, the company believes it is in the best interests of shareholders to hold back on its final investment decision. He adds:
The Tumas Project is ready to take the next step but, as we have consistently stated, a healthy prevailing uranium market is a key prerequisite. The final project approval will therefore be delayed until uranium prices fully reflect a sustainable incentivisation environment essential to encourage development of new projects for much needed additional production.
Overall, while delaying a major project might sound like bad news, for Deep Yellow, it could be a case of short-term pause for long-term gain.
If uranium prices do rise meaningfully, the Tumas Project could deliver significant value for shareholders — precisely because the ASX 200 uranium stock held its nerve during difficult times.
The post Guess which ASX 200 uranium stock is jumping 7% on big news appeared first on The Motley Fool Australia.
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