Canadian uranium explorer and miner Madison Metals has launched what CEO Duane Parnham believes is the first-ever uranium-backed nonfungible token (NFT).
NFTs are digital assets defined by unique digital identifiers that are recorded in a blockchain. The company hopes it can get retail buyers to invest in physical uranium by buying these tokens.
“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,” Parnham said in an interview with market intelligence firm S&P Global on March 10.
He explained that, while the usual buyers of uranium would be utilities, governments or trading houses, the introduction of uranium-backed NFTs meant that a fourth market could hopefully be opened up.
“I think it is going to open up a lot of opportunity for the physical uranium side of the trade,” Parnham said.
He explained that the average retail investor, prior to the tokenisation, which first took place in October last year, was not really able to participate in uranium investment, since the mineral has always been traded as a supply contract between the miner and the end-users.
He explained that Madison Metals has assembled a pipeline of high-value uranium assets, which have now been positioned within the blockchain trade.
Madison has signed a standard sales forward contract with a tokenisation group, which will take the uranium, put it on a blockchain and trade it through its network.
“They're responsible – not Madison – for all of the tokenisation and the trade, whereas Madison has provided the uranium to back that token on a one-pound-per-one-token basis,” Parnham said, noting that the tokenisation of uranium would lead to Madison finding new buyers.
He added that the global transition from hydrocarbon-based power to green energy power spelled significant opportunity for uranium, as he believed more countries would declare nuclear energy as green.
Parnham believed the growing gap in the supply and demand fundamentals for electricity would only continue to worsen, paving the way for nuclear energy to step in.
"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,” he said, highlighting France as the first country to classify nuclear energy as green.
There are already examples of NFTs being used to represent other physical commodities such as gold and silver.
In this context, an NFT can be used to represent ownership of the physical commodity, with the NFT acting as a digital representation thereof. This allows for easier and more efficient trading of commodities, as the NFT can be bought, sold and transferred without the need for physical transfer of the underlying asset.
Using NFTs to trade commodities could have several potential benefits, including increased liquidity, transparency and accessibility. Additionally, NFTs can enable fractional ownership of commodities, which can make it easier for smaller investors to participate in commodity trading.