We discuss the uranium sector with Chris Temple
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We are going to be focusing a bit this week on the uranium sector as the three of us like it for the long term. Chris has some interesting statistics regarding new nuclear facilities being constructed around the world.
India is a player in the global economy, and what about all the other other Asian countries that are developing like Malaysia, Singapore, Thailand, Cambodia, Vietnam, South Korea, or the Middle East, or the entire continents of South America and Africa?
People are going to need stuff and the energy to power that stuff……… (and food).
Just not as people in those countries, E
Collectively there are. China has about 1/4, but if you add up India and the rest of Asia then it’s a match at another 1/4. Africa and South America add up to another China sized population or another 1/4 of the world population, and Europe, Australia and N. America are the last 1/4.
Keep in mind just the US economy or the UK economy dominated the global economies with very small populations. Look at what an effect Japan has had on the global economy for the last 60 years and their an island for goodness sake.
There is plenty of development globally to offset a few ticks down in China’s expansion, is my point. India is a powerhouse, but there’s a big world out there and it isn’t just about what China does. Again, people easily get tunnel-vision and can’t see the forest through the tree in their view.
Multi decade nuclear plans, yup, that’s right Chris, for me tho I wont live that long. lol
Absolutely right about uranium, as far as I have seen anyway.
China does have plans to move to Thorium but that’s decades away too.
Im sure your aware, you just didn’t mention it on this interview.
A lot of uranium demand has been met with nuclear bombs being dismantled, I think that program ended recently. I forget the details.
It ended over a year ago, so that uranium is back out of the mix. The effect wasn’t felt, though, since the Japanese lack of demand kind of offset things. This is why — unless some other supply/demand issue comes out of left field — some like me are so bullish; that demand for product will begin to fairly dramatically outstrip supply in the next couple years. Yet we shouldn’t have to wait that long for some price action and, thus, action in E&P companies. Most end users won’t want to wait too long to lock up new supply agreements (keep in mind that the great majority of uranium is purchased via longer-term contracts. One company I am about to recommend, in fact, is getting $57/pound for its production right now, $20 over the current spot price.
I’m up to my eyeballs in uranium miners, many of which have merged with other companies I have shares in.
“since the Japanese lack of demand”
The article you linked to Chris, from your website, said the Japanese have continued to buy uranium, thereby honoring their contracts.
A big plus would be Russia/Kazakhstan withholding production, or a major mine getting flooded. A big negative would be another nuclear accident. I lived 10 miles upwind of Three Mile Island. It was a ghost town for days. Nuclear elicits a fear that could throw a wrench into un-started projects.
That’s huge Chris.
You must be speaking of energy fuels UUUU. A great company that is ready to go when the price goes up. They have several US mines that are ready to go. The uranium fuel is one of the cheapest part of a running a plant so for that reason many will pay more to buy from a safe country and not from somebody that hates us.
Agreed. I’m a big fan and shareholder of Energy Fuels – they are the largest US owned producer now and plan on supplying North American needs with their acquisition of Ur-Energy for the lower cost insitu mining.
I believe their cost per pound is in the high 50’s based on interviews I saw on BNN but I’d have to go dig through their quarterly earnings. I know (URG) Ur-Energy is operating at $56.39 per pound (see the press release below).
Sorry that should have said Energy fuels acquisition of Uranerz this year (not Ur-Energy) who is still independent but operating in the same good jurisdiction of Wyoming.
Cheers!
Most of the bigger producers are getting far more than spot price under their current off-take contracts. Here is a company producing around $57 a pound under their current contract….
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Ur-Energy Provides 2015 Q3 Operational Results and Further Guidance
Wednesday, October 14, 2015
Contract and spot sales from Lost Creek-produced U3O8 totaled 150,000 pounds at an average price of $56.39 per pound, for sales revenues of $8.46 million during the quarter. This is the eighth consecutive quarter of sales since operations began at Lost Creek.
During the quarter, production was sourced from eleven header houses in the first mine unit; header house 11 was brought online in early September and construction is well underway on header house 12. After more than two years of operations, year-to-date plant head grades remained over 100 ppm despite having somewhat lower head grades in the third quarter. This is a typical result as mines mature and older operating patterns remain in the flow regime while newer patterns are brought online. This is also demonstrated through the quarter-over-quarter increasing average flowrates.
I’m a big fan of the Uranium space moving into 2016-2018 as things start to turn around. The Uranium market has been sideways to down since the pop earlier in the year, as the energy sector has taken it on the chin (mostly due to Oil’s slide).
Personally I have averaged down the last 3 months in the following stocks (US ticker symbols):
(URG) – Ur-Energy [insitu producer still profitable at todays spot prices & they have longer term contracts they are producing at higher prices]
(UUUU) – Energy Fuels [the largest US owned producer that has made a number of key acquisitions, including URZ – Uranerz most recently]
(UEC) – Uranium Energy Corp [large asset base, however very little mining…supposedly holding out for higher pricing, but faced with legal mire. Still this stock has all of that discounted and factored in now, yet few have factored in the upside when it takes off]
(URRE) – Uranium Resources Inc [older company with good management that has been around for decades, but is reinventing itself with many mines ready to go when prices rebound. They also just acquired the insitu mining company Anatolia Energy in Turkey and plans on supplying Europe as well as the US markets]
(DNN) – Denison Mines [another company that has stood the test of time for decades, does environmental reclamation, has mines on standby, and just acquired the number 1 exploration target in purchasing Fission Uranium]
(PALAF) Paladin – [Big mines, one is on care an maintenance and does business in Australia, Africa, and Canada. They had a financial mess, the price fell like a stone, they have now restructured, and have recently had a nice pop as investors realized it looks like they are finally turning the corner]
I also hold small positions in Bayswater Uranium, Laramide, UEX, Eros Resources, Strateco, and Mawson Resources. I plan on getting a nice position in Toro energy, and Kivalliq Energy when the markets signal they are ready to run again.
What I like about this market is actually the fundamental story, and that the moves in spot price in Uranium tend to be explosive and sudden. This is definitely a market you want to have a position in before it moves, and after time their is a nice pop, it leaves everyone scratching their heads on how fast it moves. The catalyst beyond the Japanese restarts will be once the new 2016/2017 supply contracts are negotiated in the $50s-$60s. Most of the existing producers like Cameco, Areva, Uranium One, Energy Fuels, and Ur-Energy have contracts as much higher prices than spot, and they are only producing enough to meet those obligations. Most of their contracts expire between now and 2018.
There is still plenty of time to build positions for the longer term 3-5 year bull I expect to start next year, but when pricing does finally start to move it will definitely surprise investors, because Uranium doesn’t behave like most commodities.
I’m way early to the party on this one and thought we had bottomed at the end of 2014 and first half of 2015, but was wrong and it was a head fake. Uranium will have it’s day sooner or later just like PMs, soft commodities, and base metals. For now things have been rather dull and trending sideways but this definitely seems like a bottoming process with the delta between spot Uranium and the prevailing contract pricing that must be renewed with many energy companies over the next 2-3 years, and the number of mergers and acquisitions that have happened in 2015.
Good luck to all in their investing.
I have an order for URE in TSX. Hope it gets filled soon.
It’s a great company, and it has been pounded lately, so Ur-Energy should have some room to run when it does turn around. It has good contract pricing through 2018 at around $57 through 2018. It is also expanding production from another insitu well (the 12th maybe?)…. it’s on their press releases.
I have averaged down some at these low prices, but am slightly underwater on it at present. However, longer term, I expect it to represent major gains (think 3-4 fold or higher). Good luck Dragonite!
Great information Chris, the URA chart does look constructive.
I forgot to mention…..Excellent discussion today from Christ Temple on Uranium. I am in 100% agreement with the points he made today as evidenced by the stocks I hold mentioned above. Marin Katusa has some intersting (although very opinionated views on the producing uranium companies- He is buddies with UEC of course). I still think Marin makes some good points about changes coming to the Kazakhstan production (he sees it trailing off quite a bit in years to come).
Good points from Chris re: LT outlook for the uranium sector + what China and India plans are for the LT.
I always find “curious” that everyone focuses on China while India has
1) roughly the same population
2) a growing yet still small middle class
3) massive investment needs infrastructure wise.
India is one of the reasons why I am not as bearish as some of the pundits out there when it comes to the outlook for commodities for the next 5-10 yrs.
Best to all and GL investing/trading.
LPG