Uranium has been one of my best investments for the last two years. There is still plenty of room to run however it has become frothy as all the pyjama traders and large institutions try to position themselves correctly for the opportunity here. It is possible that “easy” money has been made trading uranium, but this is still a very asymmetric trade in my view. If you are willing to stomach increasing volatility, this may be worth a look.
My argument here has only improved in the last 24 months. The world continues to require more energy as a few hundred million more people have started to experience and expect the same quality of life as we have enjoyed in the West. Policy choices around the world regarding fossil fuels and alternative energy use has backed the energy sector into a corner making it increasingly difficult to cover the required demand.
What has changed in the last few months?
- Energy sovereignty has become increasingly important across the world. The example I always default to is Germany. I think they will go down as the premier example of of how to get everything wrong for the right reason. 10 years ago, Germany was leading the charge to use alternative energy and they started decommissioning everything that was considered ‘not green’. This was being done to meet environmental goals and was shown as a template for others to follow. Currently, they are burning record amounts of coal, their production based economy is in ruins due to high energy prices, and the amount of weekly power they can use for industry has a cap so their citizens don’t freeze to death. This is the result of producing much less power with contingency plans to buy energy from Russia to offset the unreliable alternative energy production. Germany is the best example, but many major countries are looking at their current and future energy needs and have seen the importance of energy sovereignty.
- After 3 decades of condemning nuclear power, Germany, Canada and many other players have decided nuclear is clean again. The interesting news out of COP28 is that there is a multi-country declaration to triple world nuclear capacity by 2050. Currently, China has 25 reactors under construction with 200 in the planning phase. France, who has benefited greatly from keeping their reactor fleet operational, has plans to build out in the near future.
- SMR, “small modular reactors”, are the new game in town. Much quicker to build, lower initial cost and proximity to urban centers are some of the benefits of this type of reactor.
- Maybe the biggest driver of the recent spike is that Kazatomprom (Kazakhstan’s national operator for uranium mining) has released that they will not hit their production guidelines. They are far and away the largest supplier of uranium to the market.
So what do we do with this information? (This is not financial advice; please do your own research).
I am holding. I think there will be some wild swings in the next 24 months. When it spikes, I will trim 10-25% off, and when it dips, I will be a buyer until any of the drivers of this story change. The chart looks like it is about to moon, but this story is very popular right now and any news will hit harder than it has over the last few years.
Some other thoughts:
Uranium is almost profitable to mine at current prices
At current production levels, more is being consumed than created yearly and a uranium mine takes years to begin operations. No large mines are currently slated for the next five years.
The price of uranium is almost inconsequential to the cost of running these facilities so the utilities will buy it even if it is 10x the cost it is now (not a prediction).
If you’re interested in diving deeper, the Uranium Insider puts out daily info specific to uranium. He has a newsletter and does YouTube videos.