The case for Uranium: Master Plan with a Price Target of 100$+
In the early 2000s, the flooding of the McArthur River and Cigar Lake mines were immediate black swan catalysts that further accelerated the existing bull market into a mania moving uranium spot prices to a peak of $150/lb in 2007. The flight to commodities as an inflation hedge following the Great Recession served as an additional catalyst underpinning the macroeconomics behind the commodity boom of the 2000s. The last bull run ended when higher supply combined with the fallout from the Fukishima nuclear disaster sealed uranium into a now decade long secular bear market. Given the lack of speculation, mines today have been idled and the industry has been in consolidation and liquidation ever since. Over the past decade, Uranium prices have descended into the abyss.
Because it costs more than $50/lb to mine uranium, the current spot prices indicate an extreme imbalance. The former Soviet state-owned-enterprise, now publicly traded Kazatomprom has forced cheap supply onto the market over the last decade, however overly bearish sentiment has held back the necessary investment in new mines and exploration leading to consistent annual supply deficits. New reactor construction in China and India has lead to strong growth in uranium fuel demand. Given the extreme asymmetry and cyclicality of uranium spot prices, investors are presented with a once in a lifetime opportunity.
On top of that, COVID19 has lead to further supply constraints. Cameco's Cigar Lake Mine, which accounted for 18% of worlds supply, was and remains closed. Now, mining companies such as Denison have started actively buying uranium off of the spot market to fulfill their obligations.
Its only a question of time until the remaining supply wont be enough to fill demand.
At that point, we could experience a bull market in Uranium and the mining companies of epic proportions.
Note that uranium bull markets are multi-year to even decade long affairs.
My estimation is that we will see prices go to around 50$ in the short term, and then continue a rise up to the 70-90$ region, where price could be sustained for longer periods.
However, on shorter timeframes, this longer term target could certainly be overshot, and by a lot.
Does 150$/lb sound realistic? Perhaps.
While we haven't had a bear market as severe preceding this bull market as we had in the early 2000s, you would need to account for other factors too.
Adjusted for Inflation, 150$ in 2007 would be around 200$ in todays prices.
On top of that, there could be additional catalists coming up along the way.
My plan is to start selling my miners once we reach the 70-90$ range, and let a portion run to see how high we can go. If we go significantly above 100$, I will make sure to not sell the rest of my shares below 100$ U308.
Keep in mind that miners tend top out before the price of actual Uranium. Catching the top will be difficult, and there probably wont be a lot of time for it.
My favourite ways to play this is to go long on $UUUU, $DNN, $CVV, $FCU, $NXG, $URE, $CCJ.
Since there are only about 20 publicly traded mining companies with (high) exposure to the uranium market, of which around 15 are viable investments in my oppinion, even a "spray and pray" approach probably will likely be able to reap in significant returns if my thesis plays out.
Once the tide rises, it wont matter too much in which boat youre in.
Because it costs more than $50/lb to mine uranium, the current spot prices indicate an extreme imbalance. The former Soviet state-owned-enterprise, now publicly traded Kazatomprom has forced cheap supply onto the market over the last decade, however overly bearish sentiment has held back the necessary investment in new mines and exploration leading to consistent annual supply deficits. New reactor construction in China and India has lead to strong growth in uranium fuel demand. Given the extreme asymmetry and cyclicality of uranium spot prices, investors are presented with a once in a lifetime opportunity.
On top of that, COVID19 has lead to further supply constraints. Cameco's Cigar Lake Mine, which accounted for 18% of worlds supply, was and remains closed. Now, mining companies such as Denison have started actively buying uranium off of the spot market to fulfill their obligations.
Its only a question of time until the remaining supply wont be enough to fill demand.
At that point, we could experience a bull market in Uranium and the mining companies of epic proportions.
Note that uranium bull markets are multi-year to even decade long affairs.
My estimation is that we will see prices go to around 50$ in the short term, and then continue a rise up to the 70-90$ region, where price could be sustained for longer periods.
However, on shorter timeframes, this longer term target could certainly be overshot, and by a lot.
Does 150$/lb sound realistic? Perhaps.
While we haven't had a bear market as severe preceding this bull market as we had in the early 2000s, you would need to account for other factors too.
Adjusted for Inflation, 150$ in 2007 would be around 200$ in todays prices.
On top of that, there could be additional catalists coming up along the way.
My plan is to start selling my miners once we reach the 70-90$ range, and let a portion run to see how high we can go. If we go significantly above 100$, I will make sure to not sell the rest of my shares below 100$ U308.
Keep in mind that miners tend top out before the price of actual Uranium. Catching the top will be difficult, and there probably wont be a lot of time for it.
My favourite ways to play this is to go long on $UUUU, $DNN, $CVV, $FCU, $NXG, $URE, $CCJ.
Since there are only about 20 publicly traded mining companies with (high) exposure to the uranium market, of which around 15 are viable investments in my oppinion, even a "spray and pray" approach probably will likely be able to reap in significant returns if my thesis plays out.
Once the tide rises, it wont matter too much in which boat youre in.
I expect the U3O8 price to surpass $200/lb and adjust my selling targets accordingly to the upside. There's no reason to start selling below $100/lb U3O8.