Hi Everyone,
I hope you all had a wonderful weekend! Our garden is finally shaping up nicely with beets, different types of squash, beans, tomatoes, peppers, cucumbers, carrots, lettuce, corn all coming nicely. The summer will be bountiful if my son can keep his hands off the said bounty.
In this week’s installment of the Road out of Serfdom, we will continue exploring the most recent development of the Uranium market. These are further catalysts that will help fuel the bull market in uranium. Precisely:
Consolidation
The Bear Traps report
Uranium in the News
Consolidation
Last week, 2 emerging players made the news by increasing their presence and foothold in the Uranium sector. CGN Mining entered into an agreement to buy 49% of the Ortalyk Mining Company from Kazatomprom, the largest uranium producer in the world. I spoke to Felix Wang, Senior Manager of Capital Operation Department at CGN mining a couple of weeks ago where we address the specific topic of M&A in the sector and CGN appetite for more transactions. What Felix referenced was that China is interested in the security of supply. Intervening in the spot market, except for their trading arm business, is not the way they want to operate and need to have a stable and secure supply for the next 3 decades. Talk about a show of strength and patience, I can barely hold my stocks for a couple of years in a row. I suspect that CGN would have bought the full mine, meaning 100% instead of 49% but since Kazaksthan wants to retain control of state-owned companies and therefore, that is why we see they have purchased a minority interest. The interesting part of the deal is that they will still need to buy the Uranium which means they basically paid 435 million USD for the right to purchase the uranium in the future. The link to the press release can be found here.
The second company is UEX that purchased JCU for 12.5 million. With this, UEX now has a 10% stake in Denison wheeler river project, 30% in Cameco’s Millenium project, 33% in Orano’s Kiggavik’s project, and an outstanding 34 % in UEX’s own Christie lake project. On the first project, Denison’s projections for the project are as follows.
On the Millenium project from Cameco, UEX picked up another 30M pounds of Uranium, reserves, and 10million pounds of resources. JCU had about 35 million in outstanding liabilities. For anyone who is patient enough, I believe UEX just made a killer with this one and I will be personally looking to enter a position in this company following this announcement. Looking at the above table of the net present value of the wheeler river project from Denison, a 10% stake will be worth a whopping 131 million USD. This project is not operational for a couple of years, however. Finally, Sprott asset management reiterated their buy rating and increased their price target on UEX from 0.50$ a share to 1.10$ a share following the transaction. A final remark on the transaction, UEX currently has roughly 5m CAD in cash available to finance this transaction. The purchase price states that the payment to be made on closing will be a 10million CAD and a further 2.5million 45 days after the closing. UEX will need to raise money to finance this. I would fully expect the company to let the stock run higher this week before announcing a private placement, in the 15-20 million range, which will be oversubscribed in my opinion.
The Bear Traps report
You probably have never heard of that report however you should from now on, be on the lookout for the headlines of that report in the future given that it moves the market. The Bear Traps reports is institutional investment research that is distributed to hedge fund manages, portfolio manager, family offices, and so on. In December, the same report seemed to coincide with the beginning of the current bull run as depicted in the URNM Exchange Traded Fund chart below. The latest Bear Traps report, shared by John Quakes on Twitter, recommends uranium once again and reiterated their strong conviction in the sector. I suspect that this will have another strong effect on the markets this week.
Uranium in the News
The Wall Street Journal had a great piece on Uranium this morning. Glad that the thesis is picking up mainstream attention. You can read it here. This article adds to the articles published in the Financial times 3 weeks ago. These articles are also available here and here. Fareed Zakaria, from CNN, also had a lengthy plea for nuclear as part of the solution to decarbonizing the energy future of the USA.
For all the scaremongering that has been mainstream about nuclear, this is clearly a shift in perception and change in attitude from governments that cannot be understated. One of the main blockers to nuclear adoption in the past had been this long-held view and stigma about nuclear energy that it is both dangerous and expensive. The Biden administration seemed to have helped in turning the tide on this Japan is also now discussing bringing back nuclear reactors that had been idle for years back into production. Frankly, I am pinching myself almost every day with the extent of the constant flow of good news being released in favor of the nuclear alternative.
that’s all for this week!
A small reminder that our Company Focus call with CEO Marc Chalmers of Energy Fuels will be held this Thursday at 2pm EST or 8pm Berlin/Rome time. There are still spots available. If that is of interest either to listen in or asks questions, make sure to leave a comment down below!
Max
Fantastic write-up, Max!