A Couple Uranium Comments

July 26, 2018

One comment from LPG and another from a member of UEC.

LPG’s comments

Very positive news for the uranium sector today with Cameco (CCJ) announcing it will indefinitely suspend production at its Mac Arthur River and Key Lake mines. (see Bloomberg article pasted below). Recall that Mac Arthur River mine was as of last year the largest producing uranium mine in the world. Just to show the company is serious about the measures announced, the firm will also lay off 550 workers (+150 employees at its  HQ).

In our weekly uranium sector update over the past 2 weeks, we wrote:    ” […] we’ll likely see more sector price action in Aug-Sept, underpinned by newsflow, esp. from CCJ re: MacArthur Mine. ” 
So it seems I was wrong:  Cameco news came 6 days earlier than the August-September window I had expected. 🙂  🙂  🙂     Joke aside, our thesis on uranium sector is playing out exactly as planned/laid out a few months ago.
U3O8 prices are slowly moving up, underpinned by newsflow which I’ve seen decisively bullish month after month. A good amount of stocks are up significantly from their lows 2 years ago, and the investment community is pretty much not paying attention/showing no sign of interest: these are the precise characteristics of a “stealth” bull market, something which happens before the herd/crowd finally realizes what is going on and piles on.

What’s next?
As mentioned previously, a key thing to watch is the U.S gvt decision on uranium imports tariffs while the Kazatomprom IPO will also, in our view, act as a sector catalyst (we would expect the Kazak to do their utmost to lift uranium prices ahead of the planned national company IPO: the government likely wants to maximise $$$).


Comments from UEC regarding the Cameco announcement.

Cameco Q2 Report: World’s largest uranium mine/mill to be kept on indefinite care and maintenance. Key Takeaways:

  • Rebalancing of the uranium market fundamentals is accelerating with extended shutdown of McArthur River/Key Lake
  • Continues to remove ~19 million pounds of production annually
  • Requires Cameco to buy substantial uranium quantities from the open market to backfill contracted commitments
  • Cameco projects this purchasing to be between 11 and 15 million pounds over the next 18 months (includes 2-4 million pounds yet to be purchased in 2018)
  • These volumes, combined with recent speculative interest and looming utility procurement cycle, should overwhelm available supplies – expect upward volatility
  • Shutdown is indefinite in nature, subject to Cameco again securing acceptable long-term contract prices (greater than $40?)
  • Extremely positive near-term development for uranium market outlook – Total production cuts since 2016 are ~30-33 million pounds
  • Occurring at the same time as strong Trump Administration support for a revitalized U.S domestic uranium industry
    Jul 26, 2018 26:19 PM

    Well the Cameco news clearly was bullish for the #Uranium sector today.

    Nice to see all the Green on the screen.

    Ticker Symbol – #Uranium Company Name % Chg

    $EPM.AX Eclipse Metals Limited +25.00%
    $FUU Fission 3.0 Corp. +16.67%
    $VMY.AX Vimy Resources Limited +16.19%
    $BMN.AX Bannerman Resources Limited +13.56%
    $AGE.AX Alligator Energy Limited +11.11%
    $LAM Laramide Resources Ltd. +11.11%
    $UUUU Energy Fuels Inc. +10.80%
    $AEC Anfield Energy Inc. +10.77%
    $LEU Centrus Energy Corp. +10.41%
    $UWE U3O8 Corp. +10.34%
    $DNN Denison Mines Corp. +9.58%
    $SYH Skyharbour Resources Ltd. +8.54%
    $UEC Uranium Energy Corp. +8.50%
    $NXE NexGen Energy Ltd. +8.40%
    $EU enCore Energy Corp. +8.33%
    $U Uranium Participation Corporation +8.15%
    $PTU Purepoint Uranium Group Inc. +7.69%
    $GXU GoviEx Uranium Inc. +7.50%
    $BOE.AX Boss Resources Limited +7.46%
    $MGA Mega Uranium Ltd. +7.14%
    $FSY Forsys Metals Corp. +7.14%
    $UEX UEX Corporation +6.98%
    $FCU Fission Uranium Corp. +6.25%
    $PWM Power Metals Corp. +5.97%
    $AAZ Azincourt Energy Corp. +5.88%
    $THX.AX Thundelarra Limited +5.26%
    $BKY.L Berkeley Energia Limited +4.91%
    $URA Global X Uranium ETF +4.37%
    $ISO IsoEnergy Ltd. +4.23%
    $URG Ur-Energy Inc. +3.94%
    $TOE.AX Toro Energy Limited +3.85%
    $DYL.AX Deep Yellow Limited +3.57%
    $CCJ Cameco Corporation +3.39%
    $PEN.AX Peninsula Energy Limited +3.13%
    $API Appia Energy Corp. +2.63%
    $ERA.AX Energy Resources of Australia Ltd +2.41%
    $GGG.AX Greenland Minerals Limited +1.22%

      Jul 26, 2018 26:32 PM

      It’s laughable that an entire sector contains less than 40 stocks. Thanks for the list

        Jul 26, 2018 26:52 PM

        Agreed. There are a few more companies not on that list above that were flat to down today, but the vast majority were up and these are the main companies.

        Yes, considering there used to be hundreds of Uranium stocks, these are truly the companies invited to the “Survivors Ball” after a bear market far more brutal than what we saw in the Precious Metals.

        It was nice to see the sector-wide spike today on the Cameco news.

    Jul 26, 2018 26:29 PM

    Note to the bullet point you have, “Cameco projects this purchasing to be between 11 and 15 million pounds over the next 18 months (includes 2-4 million pounds yet to be purchased in 2018)”

    Cameco noted on call that they buy, at minimum, about 4 months ahead of time. They kept emphasizing their long term outlook, scope, and business process. Those 11-15 million pounds need to begin being purchased THIS calendar year, not just in 2019.

    Uranium purchasers, nuclear reactors, are being extremely stupid right now. Cameco just laid off a huge portion of their workforce and made a clear statement they are not restarting McArthur River in the near term. I am extremely bullish on uranium here and am extremely confident that a bull market will begin shortly.

    Being even more speculative…:
    I am even beginning to think that there may be a literal supply deficit soon. Exploration has been minimal. Uranium purchasers caused their own doom here. They might not be able to secure long term supply.

    So the next major thing that I am looking for is Kazatomprom. Once they go public watch their production numbers. If Kazatomprom’s mines show any sign of shortened mine life uranium will go up exponentinally.

      Jul 26, 2018 26:00 PM

      Great points Snowy. Yes Cameco will be buying in the spot markets in 2018 as well as next year, and Ur-Energy has been doing the exact same thing the last 2 years to meet contractual off-take agreements, and preserving their assets in the ground. It is way the hell easier to just buy the Uranium on the spot market at such ridiculously low prices, than it is to go to the trouble of mining it.

      It would be like having an offtake agreement for huge amounts of $30 an ounce Silver, but being able to just buy it at $15 an ounce on the spot markets. It’s a no brainer, and all this buying on the open markets from Producers, will start soaking up the overhang over the next 12-24 months.

      As for Kazatomprom, they have been milking their assets for the last 5-7 years, but not really putting as much money back into maintaining and developing their assets, so their costs will gradually creep up as their reserves decline, and this will only serve to underpin more price appreciation the supply side continues to whither away further.

      Also the nuclear warhead decommissioning and underfeeding were both insidious secondary supply forces since the pricing collapse in 2011, and only exacerbated the situation further. Those have both declined big time over the last year, so that is why 2017 were the first green shoots, and now in 2018, it does seem like the tide is finally turning.

      Ever Upward!

    Jul 27, 2018 27:21 AM

    PALAF for me. Company is on it’s last leg but when the bull runs….

      Jul 27, 2018 27:35 AM

      It would be the turnaround of all time in the sector if Paladin came back to life, but as you say, it would be epic if that were to play out. I’m less encouraged by Paladin after watching them flush value down the drain for years, but at this point, it may be worth a speculative punt.