➤ Commodities markets can open to new buyers with the creation of non-fungible tokens, or NFTs, backed by metals and other mined materials.

➤ Uranium spot prices are increasing as supply gaps widen, creating opportunities for producers.

➤ New spot participation funds have the potential to drive up spot prices for uranium.

Duane Parnham, executive chairman and CEO of Madison Metals. Source: Madison Metals Inc.

Mining companies are looking for ways to incorporate blockchain technology into their operations as use of the information sharing mechanism grows. Producers of some materials such as gold have been exploring ways to open commodities markets to blockchain-based digital investing, which they say can expand commodities’ investor base and improve supply chain transparency.

Uranium explorer and miner Madison Metals Inc., headquartered in Ontario, launched what it called the first ever uranium-backed non-fungible token, or NFT, in October 2022. An NFT is a unique digital identifier that is recorded in a blockchain. The company hopes it can induce retail buyers to invest in physical uranium by purchasing tokens.

S&P Global Commodity Insights spoke with Duane Parnham, executive chairman and CEO of Madison Metals, about opportunities for digital investing in commodities using NFTs. The following conversation has been edited for clarity and length.

S&P Global Commodity Insights: Madison Metals' uranium is being used to support what the company describes as the first-ever uranium-backed NFTs. Why did you decide to enter the NFT space?

Duane Parnham: I'm about 30 years in the mining industry, mostly focused on small-cap startup companies. And what I noticed over the last number of years is that it's been increasingly difficult to raise capital for highly risky ventures, like the frontier exploration-type companies you'll find in the mining industry. I was looking for ways to help bridge traditional financing methods to this new-world, crypto-digitization space, where a lot of new capital has been generated.

I thought of this idea about a year ago, and then only at the end of 2022 was I able to find a group that had the capability of tokenizing a real-world asset using uranium.

Using uranium has its own particular unique qualities because of the opaqueness and specifics of the uranium trade. Basically, what Madison Metals and I have done is found a fourth buyer for uranium product. The other three buyers would be utilities, governments or trading houses. They usually trade on supply contracts. But now, looking at a fourth market, I think it is going to open up a lot of opportunity for the physical uranium side of the trade.

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How exactly does investing in a uranium-backed NFT work?

Madison Metals is an early-stage mining company; we have particularly strong, valuable assets in Namibia, and I've been working in Namibia for 22 years. I licensed a previous uranium mine. We took it from a historical resource to a fully licensed permitted mine.

[With] that experience, what Madison Metals has done is we've assembled a pipeline of very high-valued uranium assets. Where we're positioned in this blockchain trade is we've signed a standard sales forward contract with a tokenization group ... that then would take our uranium and put it on a chain and trade it through their network. They're responsible — not Madison — for all of the tokenization and the trade, whereas Madison has provided the uranium to back that token on a one-pound-per-one-token basis.

There has been some discussion that nuclear power is entering a renaissance period, which would have significant implications for uranium supply and demand. How would you describe the current state of the uranium market?

The mining side, I think, is pretty stable, meaning we have significant resources, and it's all price sensitive. ... Where I'm seeing an opportunity now on the uranium side is we've seen spot prices creep up into the $50 per pound range.

One of the things that are getting me excited is this whole transition from hydrocarbon-based power to green energy power. France is the first to classify nuclear energy as green, and you're looking at supply and demand fundamentals that are increasingly [experiencing a gap] globally from the demand use of electricity. And I believe that this gap is only going to get worse, meaning the hydrocarbon and the clean energy sources right now are not sufficient to supply baseload power the way that nuclear energy can. We're already seeing countries like Germany and Japan and abroad changing, reversing their nuclear energy needs. I think just on that side of the equation, there's going to be an increase in demand of spot uranium.

What do you expect the future of digital investing opportunities in uranium to be, including uranium-backed NFTs?

There are some dynamics in the marketplace that I'm getting very excited about. And that is finding new buyers for uranium, such as with the tokenization. The average retail investor, prior to this tokenization, has never really been able to participate in investment in uranium. Uranium has always been traded as a supply contract from the miner to those three end users that I mentioned earlier. But this is now adding a fourth dimension to the trade.

There are also apparently two new spot participation funds that are starting up: one in Singapore and one in the U.K. And these are funds much like [asset manager] Sprott Inc.'s participation fund that is raising significant amounts of capital. And if these funds are successful, then they're going to be mopping up a lot of the excess supply in the marketplace, meaning that I envision that the spot price could potentially move from the $50 range potentially into the $70 or $80 range.

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