Amazing article! The information you are providing is so precious to a guy like me. I got interested in investing in the mining industry recently because I strongly believe that oil will be replaced by different metals in the next decade because of the rise of EV and the need to move to alternative energy sources and storage of renewable energy like solar and wind.
I am also a strong believer in nuclear energy and I hope that the next decade will be a pivotal decade bringing new discoveries and a renewed interest toward this energy.
Thanks for helping us to understand this mining world and all the investments possibilities!
Great article. Which small cap uranium equity plays do you think are most likely to go 20x to 50x over this decade from the list highlighted in yellow?
I already own Cameco but that is the blue-chip in the sector.
Hi James, in the article I mention that explorers have the best chance to hit the 20x to 50x. I have my own favourites obviously but that is where I think the most return, coupled with the most risk, will come from!
Looking at the list of explorers, a few have recently surged in value. Are there any on your portfolio that would suggest to you that they are currently particularly good value to buy at the current moment?
The ones I currently like that have not yet been picked up by any ETF funds but have a strong story, management team, and tight share structure are very few. My personal favorites are Standard Uranium, Baselode Uranium, and Forum Energy Metals.
Thank you for the great analysis. How about uranium processing factor? I have heard it is kind of bottle neck. Cost effective centrifugal method is very challenging, and most of the world relies on Russia for it. The other method, easier to apply, is about 50 times less effective.
Great Question! The processing is highly concentrated because it poses many challenges. As you might be aware, we do not want to have a proliferation of uranium enrichment capacity since it can also be used to create fissile material for bombs. therefore, this market is highly regulated. I however would refer you to the World nuclear org website: https://www.world-nuclear.org/information-library/nuclear-fuel-cycle/conversion-enrichment-and-fabrication/uranium-enrichment.aspx. The increase in enrichment facilities in the last 50 years has been incredible which in turn contributed to the oversupply situation from 2011 to today. Orano, Urenco, Areva, Engie are the big names. The business model for enrichment is different and the money to be made is quite different from uranium mining. I personally do not intend to invest in that part of the nuclear supply chain but an argument could be made that this is also interesting although would not produce the same kind of returns we expect to see in uranium mining/producing equities.
Great article as always and thanks for the great data! How much of the demand growth expectations and the expected increase in spot price is already priced into the market?
The issue with the spot price is that it reflects a very tiny amount of the total uranium sold. Utilities are still mostly buying from long-term contracts at 40$/lbs++ at the moment. The spot price, therefore, reflects what is not contracted and can easily be misinterpreted. The current spot price cannot allow any conventional new project to supply uranium. Only some ISR projects with assumed cash costs of less than 10/lbs could be profitable but given the very large CAPEX required to first build the complex, there is not an incentive for companies to invest just yet. That is why I keep referring to the magic long-term price of a minimum of 50$/lbs. At that price, McArthur River and Paladin's Reicher mine can come back online and that would give us an additional roughly 30m lbs of urnium.
If you refer back to the graph, that will not be enough to meet the demand from 2024 onwards. That is a very long-winded answer but to keep it short, there are 2 prices. The spot market slowly creeps back up depending on secondary supply mostly and stocks management from years of oversupply after the Fukushima incident and the long-term price. The utilities have been reluctant to negotiate a higher price long-term contract. What you need to know is that when the news breaks out, either from a utility or someone like Cameco that they were able to secure long term contracts at 50$/lbs, it will be too late to buy the equities because the day after that news, the market will see this as the fuel needed to bump most of the projects that are currently waiting for higher prices to put them in construction or production. And at that time, we will be off to the races. The question that I will try to answer in the next article is how long do we have to work through this inventory so that even the spot price will be high enough that it will signal to utilities must sign long-term contracts.
Incredible answer, again thanks for your amazing help. I will be doing some research on when the largest contracts expire to try and see when we will most likely see some movements. Can't wait to read your next article!
Lovely article. Very deep and not long at the same time.
Imagine you're the gov of let say France who has nuclear plants - what is their opportunity cost for not expanding nuclear program? Would they turn more to green energy and abandon nuclear thus reducing demand?
Please to read you here. The fact of the matter is, in the earlier article, I referenced the total carbon footprint and energy density of Nuclear. It is by far, the best continuous energy with an extremely low carbon footprint. Therefore, it is superior to the wind and solar. The opportunity cost is $$ and time. A nuclear reactor takes 5 to 10 years from start to finish, in the west, to build. The cost is also quite high ( read in the billion). The hope for the future is to have the smaller modular reactor technology come faster to life. I however think the big issue with Nuclear has been the bad press in the past decades from Chernobyl to Fukushima. Once the environmentalist gets on board and see that nuclear is our best investment in green technology, I think we will begin to see more projects in the west as well.
I guess in this case the price of nuclear energy will highly depend on how fast can nuclear lobby push through change in the narrative of politician or public mindset. Gotta watch out for newspapers as early bird sign :)
Amazing article! The information you are providing is so precious to a guy like me. I got interested in investing in the mining industry recently because I strongly believe that oil will be replaced by different metals in the next decade because of the rise of EV and the need to move to alternative energy sources and storage of renewable energy like solar and wind.
I am also a strong believer in nuclear energy and I hope that the next decade will be a pivotal decade bringing new discoveries and a renewed interest toward this energy.
Thanks for helping us to understand this mining world and all the investments possibilities!
Happy to hear you find value in my writing!
Hi
Great article. Which small cap uranium equity plays do you think are most likely to go 20x to 50x over this decade from the list highlighted in yellow?
I already own Cameco but that is the blue-chip in the sector.
Hi James, in the article I mention that explorers have the best chance to hit the 20x to 50x. I have my own favourites obviously but that is where I think the most return, coupled with the most risk, will come from!
Hi, thanks.
Looking at the list of explorers, a few have recently surged in value. Are there any on your portfolio that would suggest to you that they are currently particularly good value to buy at the current moment?
The ones I currently like that have not yet been picked up by any ETF funds but have a strong story, management team, and tight share structure are very few. My personal favorites are Standard Uranium, Baselode Uranium, and Forum Energy Metals.
Thank you for the great analysis. How about uranium processing factor? I have heard it is kind of bottle neck. Cost effective centrifugal method is very challenging, and most of the world relies on Russia for it. The other method, easier to apply, is about 50 times less effective.
Great Question! The processing is highly concentrated because it poses many challenges. As you might be aware, we do not want to have a proliferation of uranium enrichment capacity since it can also be used to create fissile material for bombs. therefore, this market is highly regulated. I however would refer you to the World nuclear org website: https://www.world-nuclear.org/information-library/nuclear-fuel-cycle/conversion-enrichment-and-fabrication/uranium-enrichment.aspx. The increase in enrichment facilities in the last 50 years has been incredible which in turn contributed to the oversupply situation from 2011 to today. Orano, Urenco, Areva, Engie are the big names. The business model for enrichment is different and the money to be made is quite different from uranium mining. I personally do not intend to invest in that part of the nuclear supply chain but an argument could be made that this is also interesting although would not produce the same kind of returns we expect to see in uranium mining/producing equities.
Thank you Maxime
Great article as always and thanks for the great data! How much of the demand growth expectations and the expected increase in spot price is already priced into the market?
Great questions!
The issue with the spot price is that it reflects a very tiny amount of the total uranium sold. Utilities are still mostly buying from long-term contracts at 40$/lbs++ at the moment. The spot price, therefore, reflects what is not contracted and can easily be misinterpreted. The current spot price cannot allow any conventional new project to supply uranium. Only some ISR projects with assumed cash costs of less than 10/lbs could be profitable but given the very large CAPEX required to first build the complex, there is not an incentive for companies to invest just yet. That is why I keep referring to the magic long-term price of a minimum of 50$/lbs. At that price, McArthur River and Paladin's Reicher mine can come back online and that would give us an additional roughly 30m lbs of urnium.
If you refer back to the graph, that will not be enough to meet the demand from 2024 onwards. That is a very long-winded answer but to keep it short, there are 2 prices. The spot market slowly creeps back up depending on secondary supply mostly and stocks management from years of oversupply after the Fukushima incident and the long-term price. The utilities have been reluctant to negotiate a higher price long-term contract. What you need to know is that when the news breaks out, either from a utility or someone like Cameco that they were able to secure long term contracts at 50$/lbs, it will be too late to buy the equities because the day after that news, the market will see this as the fuel needed to bump most of the projects that are currently waiting for higher prices to put them in construction or production. And at that time, we will be off to the races. The question that I will try to answer in the next article is how long do we have to work through this inventory so that even the spot price will be high enough that it will signal to utilities must sign long-term contracts.
Incredible answer, again thanks for your amazing help. I will be doing some research on when the largest contracts expire to try and see when we will most likely see some movements. Can't wait to read your next article!
Lovely article. Very deep and not long at the same time.
Imagine you're the gov of let say France who has nuclear plants - what is their opportunity cost for not expanding nuclear program? Would they turn more to green energy and abandon nuclear thus reducing demand?
Azer
Please to read you here. The fact of the matter is, in the earlier article, I referenced the total carbon footprint and energy density of Nuclear. It is by far, the best continuous energy with an extremely low carbon footprint. Therefore, it is superior to the wind and solar. The opportunity cost is $$ and time. A nuclear reactor takes 5 to 10 years from start to finish, in the west, to build. The cost is also quite high ( read in the billion). The hope for the future is to have the smaller modular reactor technology come faster to life. I however think the big issue with Nuclear has been the bad press in the past decades from Chernobyl to Fukushima. Once the environmentalist gets on board and see that nuclear is our best investment in green technology, I think we will begin to see more projects in the west as well.
I guess in this case the price of nuclear energy will highly depend on how fast can nuclear lobby push through change in the narrative of politician or public mindset. Gotta watch out for newspapers as early bird sign :)