Uranium's Bull Run Pauses, But Why Bigger Gains Lie Ahead

[Music] good to be back um it's been a very interesting year in uranium and uh recently was at the Bank of Montreal uh mining conference in Hollywood Florida where over 2,000 uh attendees uh were were were in attendance um which I think is an all-time record and I think it's a a good reflection of the growing interest uh the returning interest is probably the right way to say it uh in in my and I think the the thing that I found interesting about uranium was when I went three years ago uranium did not get any uh stage time and when I went two years ago uh I was invited to be on the 7 amm breakfast panel meeting you know nobody shows up and and this year uh we were invited to be on the the 12:30 lunch yellow cake Cafe with cico so I think that's a good reflection of of the growing importance and uh interest amongst institutional investors John good see like can appreciate that update um I didn't get to catch you in in up in Toronto I think you were busy um still dealing with things down down at bimo or post beo as well look I want to talk to you about that mood you talk about as a positive mood um and the kind of moving sentiment towards um uranium when you're down at bimo but there's also a little bit of confusion in the marketplace at the moment we we've come off these highs of you know whatever was at beginning of this year 106 uh bucks on on the uran spot um back down to the sort of mid 990s um people some people are going well is this it is this is this as good as it's gonna get what do you reckon I think um we we are experiencing a corrective pause uh and and that's it um I think people have to keep in perspective we had a pretty big move from 60 bucks in September up to you know 105 106 and now we're back in the low 90s um so it's been a very healthy move what I am surprised by is uh given the announcements we've seen this year predominantly from um kazad from that they have simply gone from you know we're going to flex production by 8 million pounds this year to oh sorry change of plan you're getting no extra pounds it's a bit mind-boggling to us that the price of uranium is is basically where it was on December 31st having uh having that key fact hit the market so I think there is is definitely some I think some anxiety some confusion in the market because you know some of the messaging we're getting from the key producers is is really unclear in terms of what are the real issues what does the production profile look like not just for this year but for next year you know going back to kazad prom they would typically at their March um uh analyst call announce the 2025 you know the year for production and they recently announced that um this Friday March 15th they will not be providing any 2025 guidance and will it will be coming in August which is another you know another kind of example of investors not getting Clarity on what the production profile um you know is is looking like which obviously has a big impact on price and short ter and C well well AB absolutely does but it kind of reminds me that perhaps not Everyone likes these high prices right now as well not getting conspiratorial I'm just saying who wants to pay more than they need to do do you think there's an element of that in the marketplace where perhaps everyone's taking not just investors but everyone's taking a breather and saying well actually I'm going to stop buying and so of step back and see what happens uh we definitely think that there is an element of a bit of a a buyer strike going on right now uh as I said the price you know moved up week after week after week and I do think some parties that that were buying pretty consistently last year have definitely stepped to the sidelines which just created a bit of a vacuum and and that's I think allowed the price to come down but at the end of the day you're only kicking the can down the road you still have uncovered requirements uh whether the price is 90 bucks a pound or whether it's 200 bucks a pound you need to cover your book in terms of future requirements and I I think that's one of the things you have to just keep in mind that uh at the end of the day fundamental fundamentals will rule yes we hit these Pockets where we got to go sideways I've always believed that the Irani price was going to follow kind of a staircase uh kind of pattern and and that's what's been playing out for the last three years where we've you know broken from 30 to 40 to 50 to 60 to 70 80 and so on and it needs some time I think to base and and to consolidate around each of these kind of staircases okay what do you think that looks like sorry what what what does that mean in terms of the I mean how how wide are these staircases you know how long do we wait I I like these kind of breathers and pauses to just test stress test pricing along along the way nothing wrong with it as long as I feel that there's a lot of stairs to to still to climb so how do how do you think the next couple of weeks plays out well the next couple weeks I mean the only meaningful piece of information we're going to get maybe um is from kazad prom um and and they've been pretty Cy with information so it's it's really hard to say but at the end of the day you know utilities are are active in the term Market we don't always see it because those many of those contracts are not public some of them are there we see lots of rfps in the market there was an RFP in the market uh that was adding a 15-year time Horizon for about 20 million pounds of uranium so there's some pretty sizable contracts with very long tenures out there as utilities are trying to find long-term security supply uh the spa Market obviously is a little bit more fickle um utilities have clearly decided to to to shift more of their focus on the turb market um these these staircases you know we've seen the last couple years they can last several months um it's quite normal I do think it gives people an opportunity to miss the earlier moves and you're a them a chance to get in I mean we talk to institutions all the time that kind of kick themselves and say you know we kind of missed we kind of missed it so far and when you get these pullbacks it gives them you know some reason to to think about okay um prices just pulled back and and maybe there's a good entry point here so I also think what's What's happen happening is we're getting some rotation of shareholders meaning investors that were early two three years ago four years ago some of these folks are taking profits they're taking some money off the table I'm not saying they're blowing out all their positions but they're clearly taking some profits that is allowing other investors to kind of come in so some people might say well gosh you know there's all this people are are are you know selling out of the fund that equivalence of 80 or 90 or $100 pound but guess what somebody's buying their position at 90 $100 a pound even though you know that they they've missed the first $60 the last $60 move or whatever so I think it's healthy uh as I said the markets move pretty quickly nobody wants this price to spike you know if you think about all the vested interests in this industry the utilities clearly do not want that the uh Department of energy does not want that governments do not want that they want a nice orderly Market um and you know people have to remember that utilities have the benefit benefit of waiting you know uh they can't wait forever but they have inventories for this exact reason to you know basically step aside if the Market's too hot or or if there's a short-term Supply disruption these inventories basically get them through those periods and I just get I just get the feeling people are are are are trying not to Chase and push the price up because it it moved a lot in uh September October November December do you think the size of this Market is partly to blame it's a small Market there are very few players you only need a handful of players to sort of dramatically change the price po up or or down quite frankly and therefore you are going to continue to see these these spikes as we get whether be you know price Discovery or Supply shocks or all of these things which have you know we we we've seen before do you think they'll continue to influence the way that this Market plays out yeah I I think that's just the natural outcome of having a fairly small Market if you think about the just the total dollar value of uranium produced a year I mean we're talking about 15 odd billion dollars it's a drop in the bucket compared to say the copper Market which is $200 billion doll a year you also have uranium you know the production of uranium concentrated a very small number of countries and companies but the good news is we're finally getting new producers online this year you know you've got the the bosses and the paladins of the world finally getting back into production you know at prices of $90 plus uh I think it's fair to say that just about every uh previously producing uranium mine uh has a chance to come back online if there's you know any reasonable reserves left you know I think it's it's it's interesting when you're getting announcements that mines that were in operation 15 years ago are are planning to turn back online it tells you that um the price is well above the cost curve of of all these Brownfield uh projects now at $90 or $100 are we going to get new Green Field built that's that's to be determined but I think our our most important message to investors is that uranium prices are going to have to stay elevated for a very long time because we know the development cycle is very long we know that capex dollars required are very significant this just can't be a you know you get the 90 and then you you shrivel away and you go back to some sub economic price that is not going to solve the long-term Supply issue that the industry is really trying to fake you know to to to deal with at a time when the when the world is really trying to Pivot back to nuclear energy so you know I I focus on the big number and the long-term number which is you know depending on your estimate somewhere between a billion and a half to 2.3 billion pounds of uncovered requirements that utilities have to deal with between now and 2040 uh that's staggering you know when you put that into context relative to 150 odd million pounds of primary production right now and two of the largest uranium producers in the world um having some challenges in terms of flexing production up right and demand is definitely do it doing its uh fair share of work it's doing all the heavy lifting at the moment um I think on the sply side there's some concerns obviously price prices are going to help um people on paper be economic I think was talking to a professor D us Professor he works in the space com in the space and his concerns over kind of critical minerals or mineral security in in North America more broadly is the fact that you kind of got the social component is taking a disproportionately large um role in the ability for these companies even if they could get Finance to be allowed to get into Finance does that worry you at all in terms of the supply chain you mentioned a few people have got managed to get over the hump there but not everyone's going to be able to do it so quickly right yeah I mean listen where I live in Canada um just a a few weeks ago the federal government here announced that they uh they would like to uh streamline and shorten the environmental permitting uh process for Mining and that that has got to be music sweet music to every Mining Company in the world that governments are finally openly acknowledging that they're part of the obstacle you know time is a killer you know the longer you stretch these processes out and drag out you know first production and cash flow it's just it's just a huge disincentive to invest to get behind these projects and so governments are realizing the the National Security the economic security uh the value created of some of these projects particularly in remote communities where uh you know these are very good high-paying jobs for people um the fact that it's being acknowledged and now again you know proof is in the pudding you need to you need to walk the talk here but at least they're openly acknowledging part of the issue and I think that has been a long overdue in terms of um the mining industry okay and well it's good it's good to hear I say let's you know show me show me is is the statement right um what are the other kind of red poles you red red flags that um um for you in terms of our ability the Supply's ability to deliver or at least start to deliver against some some of this um this Gap that we're saying yeah I just think um the one of the main challenges with with all these industries is labor um and and and skill and experience label I think it's an issue of across the whole nuclear Fuel and and U uh nuclear energy supply chain you know we basically stopped building nuclear power plants for 30 odd years uh then you go and try to build the first one uh after a very long extended period of time and you find out the knowledge the the expertise the specialized workers are no they're no longer found and uh then you have these big cost overruns and and and budget issues um and that goes everything from Upstream to in mining to the the guys that run that the Mills and the processing facilities you know all the way Downstream so I think um that's one of the biggest challenges is finding skilled labor um there are many competing Industries for that labor and uh it can be a challenges just try to flex up your Workforce particularly in remote communities where you know you don't have a huge labor pool to draw on mean you think that's the only problem I mean is money readly available for these companies as and when they need it are because you you said to me last time you just been on a US Road Show European Road Show You' met goodness says how many um investment groups New to uranium they like what they heard but you know they're still they're still sort of I guess sitting back and waiting to see what they do in ter terms of deploying Capital you know and you know you'd be very very interested in this with your own with your own um the the physical uranium trust what is the likelihood of big money coming into the space and solving problems for for miners uh and anything and everything Downstream from there yeah I mean I think it's it's basically starting at the top and and has to trickle down um we are starting to see that trickle down and the trickle down is happening because the commodity price is sufficient so that many of these smaller producers particularly the ones that had previous producing Minds could finally get back online that's that's thing one um so I think we've solved for that issue um but as you trickle down even further and you're you're getting into the Green Field um you know in many parts of the world $90 or $100 or $120 uranium if it's sold you know forward on long-term contracts with with those kinds of price gaps um that makes a lot of uranium mines viable now you still need investors to part with their cash and I think that even in a b Market you're going to get people being very picky about the best projects the best management teams um it's not going to be you know all all boats get floated but I think the best projects the best teams have the best chances of raising the capital executing against their plans and delivering real value to shareholders um and I think that's the phase we're in right now we're still in kind of a a phase where the market is is getting sorted in terms of what which are the best companies uh going forward okay and what are the kind of key drivers because if I'm looking at you guys right you you know you you've got some you've got a bunch of conditions that you need to operate under before you can buy before you know uh and you've bought a lot was a 400,000 pounds um how how does the market need to change how does the market need to change in the way it operates functions um before you know you can take advantage of of that not just precisely the term of the mechanics of your fund but in terms of like moving forward at PACE where you can maybe start to affect a little bit of change and sentiment in the market yourselves yeah absolutely well you know we have a key fundamental test that we have to we have to um achieve with the way the spra physical uranium trust operates and that is if it trades at a premium to the previous day net asset value that gives us the ability to issue new units into the market and we have not been in in such a position for the past several weeks we were earlier in the year um and until that Discount closes you know unfortunately we're kind of on the sidelines now you know we're sitting on 63 and a. half million pound so there's a lot of value in in in sequestering those pounds um but in terms of getting new cash into this into the sector uh into the fund so that we can deploy it and buy in spot Market you know that's that's something that we have to be patient for what we have found historically is that even though we can be at a discount for a period of time it often only takes one piece of news to close that discount get back into a premium and get going with more procurement so you know we just have to you know be patient and try to focus on the things that we can control which is why we we were so active of the market marketing but also you know just basically educating institutions about how this Market works we still find institutions uh in very early stages of doing their homework you know do I think that some institutions got interested in the sector and then paused and went oh Jesus just had a big move maybe maybe I should wait a bit and and watch it uh but I do think people are are are are watching it and and waiting for you know entry points the other thing I guess I would mention is we've seen um a disproportionate share of interest uh in our Junior uranium mining ETF which speaks to the earlier comment I me about the trickle down effect and so why is that why is interest trickling down to the smaller cap companies well it's because the uranium price achieving these these thresholds I think disproportionately benefits the smaller cap companies why because they have a better chance of actually raising capital and moving their projects forward uh they largely are unhedged in terms of selling production forward that's very beneficial in a rising price environment and utilities are knocking on their door saying hey if you want to bid on these rfps you know for future production you're invited so obviously there's a bit of a a different you know scenario there in terms of of funding a green field operation but from the Juniors I've talked to they're absolutely being engaged uh with a you buy the utilities they're being they're being invited to the party and at the end of the day they've got an execute deliver and and and be able to fulfill the contract needs but I think investors are connecting all these dots and it's the reason why we're seeing uh disproportionate amount of capital go into the junior uranium mining ETF um versus the senior uh uranium mining ETF and even the physical uranium trust which is obviously 20 times in in size so I think that's a healthy sign of of um the trickle down happening and also an improved risk taking appetite amongst investors can I can I just like get have a conversation with you about what kind of what what sort of frustrates you a bit because like I think people look to you and go spra physical uranium trust is going to solve our problems it's a it's a big uranium fund you buy up pounds you soak up those pounds and that's the kind of thing I should be looking at but even you been paralyzed by the kind of re you know recent market news or lack thereof or maybe even quite mixed messages in the marketplace by people like maybe kamico I think by being not particularly clear like kazum from you know you know just volte fast changing 180 degrees on we don't have P we have pounds what what are the things that you you're looking to is it something significant like you know enriched uranium Supply being sanctioned is that is that the big piece of news that even you as one of the 800 pound gorillas in the room is looking for or is it always going to be about Market fundamentals of the people producing the pounds um into that kind of demand um that we're seeing in a coming down the line yeah look at the end of the day this Supply demand fundamentals Drive everything in the long term in the short term we've got a lot of noise we've got a lot of we've got a lot of distractions um just going back to the ban on Russian enriched uranium I think that's a very topical uh thing to cover because when it passed in the US House in mid December that completely took the market by surprise nobody thought it was going to pass so quickly including utilities they got kind of freaked out like oh my gosh this just passed now when it went to the Senate and and got vetoed by um Ted Cruz everybody took a sigh of relief and said okay this is an m now fast forward you know we're in the middle of March what's going on with the bill um it's I can't even track it anymore in terms of where is it I do think the psychology uh of the fuel buyers will change once it is officially lock and um so you might think yes everyone's known about this for a long time and it's snaking its way through the legislative process but I do think it will change the psychology of the fuel buyer it will become more real the clock is officially TI in and then you also have the Wild Card of what can happen between now and 2027 will there be retaliation so we do look for those events We are following those events in Washington to find out where these bills are um they are important in the short term they definitely they help psychology um and you know but the longer term Supply demand fundamentals uh I would say it it only gets better the the issue is it's like looking at a glacier and if you've ever looked at a glacier uh which I have the privilege of doing a few times um it clearly doesn't move but if you you know put your time-lapse camera on and then you go back and watch it it's moving all the time that's kind of the way I described the uranium Market looks like nothing's happening but it's moving all the time just very slowly and when it does uh have these moments you know it it it obviously can uh can move very quickly so um you know I know shareholders now are a little bit confused around the the messages the price signals the market signals uh but a lot of its noise I think also there's been a lot of short-term hot money that's coming into the into the sector over the last couple of months we've heard from many different institutional trading desks there were a lot of hedge funds that were putting very shortterm trade uh oriented trades on uh in many cases using options that were playing everything from production uh you know Miss misses in terms of trying to guess whether a company was going to Mis production to uh uranium mining ETF rebalancing uh index Arbitrage trades I think a lot of those guys that got their fingers burned a little bit they've kind of flushed out um our our contacts have told us that a lot a lot of those guys quickly Unwound and and moved on you know that that's I think created a lot of noise an extra volatility uh the last three four weeks on the equity side but in terms of here here's question I want to ask you about the fundamentals right because that you're say that's the key driver here it's it's it's not it's not you it's not the you know the the other funds it's it's not necessarily any individual utility it it's the fundamentals need to stand up so if I if I look at something you just talked about the politics going on obious with the house voting for it Market moved now it's got to get through the Senate you I think Republicans potentially you know holding things up there maybe Trump is he seems a little bit more not as I'll put it this way not as anti-russian as the current um the the the the the current president does it matter if this doesn't the the the the Senate doesn't vote on it does it matter if they vote positively and they they they they vote to you know put it into law and Trump comes along and unpicks it at the at when if he gets into power does it matter is it it doesn't seem to change the fundamentals is is my hope what do you think yeah I agree wholeheartedly at the end of the day whether you hire radam to do your enrichment or you hire your ranco doesn't matter you still need the pounds um you know we're talking about pounds versus services and so you're just talking about the parts of the fuel cycle that are outsourced to Russia uh and have been outsourced to Russia for 30 odd years so it's it's it doesn't really fundamentally change anything other than I think near term you know which which supplier you going to be relying on and um I think everybody in the industry that we've talked to there is consensus that it is going to pass it's just a matter of when not if which is why I want that Nuance of even if it does pass and Trump gets into power and he undoes that which he's here a record of doing it doesn't matter I don't think it matters I I also think that there are many republican uh states in the United States like Wyoming and Utah Arizona Texas previous producing uranium uh parts of the country that are very focused on resuscitating the Uranian mining Industries um and I think you know I I want to just for the record say that the Biden Administration has been incredibly pronuclear um it's it's astonishing to us I mean they just they just passed the the multi-billion dollar uh Bill to to to support that the transition of of nuclear Fuel Services away from Russia to Friendly um sources and and you know everything the Biden administration's done has been incredibly supportive for deer energy from you know helping to save power stations to all the tax credits to The Loan The Loan program eligibility I mean they've been incredibly so my main message is is that you know irrespective of who wins the election November I think the the the the federal government support United States for nuclear Ary will continue good good way to end John appreciate thoughts today and insights um still looks good don't worry we're taking a breather we'll go again absolutely

Channel: Crux Investor

Views: 11,172

Keywords: mining, gold, nickel, cobalt, uranium, vanadium, lithium, precious metals, crux investor, cruxinvestor, silver, TSX, ASX, AIM, LSE, investing in uranium, investing in mining, investing in stocks, investing in stocks for beginners, investing in gold, invest in stocks, invest in stocks for beginners, invest in gold, invest in mining, analyst's notes, analysts notes, analyst notes, battery metals, electric vehicles, net zero, carbon neutral, carbon credits, nuclear, best mining stocks, TSXV

Id: IluPgTrhYJg

Length: 27min 25sec (1645 seconds)

Published: Wed Mar 13 2024