Uranium’s Violent Upside: Why the Time to Position Is Now

Uranium’s Violent Upside

Why the Time to Position Is Now

For over a decade uranium has been one of the most hated commodities in the resource space, if not the most hated.

For a long time, the very mention of the word conjured up images of Chernobyl and Fukushima.

Speculators and investors newer to the resource space who have never seen a uranium bull market have no idea that uranium presents one of the most compelling risk-reward propositions in years… if not ever.

I think 400%, 700%, even 1,000% gains will be common in this uranium bull market.

Uranium bull markets are violent. And speculators and investors positioned properly will make a fortune.

How violent? For perspective let’s take a look at the last uranium bull market, which ran from 2001 to 2006.

In 1999, the spot price for uranium was approximately $8/lb. By 2007 the price had skyrocketed to $136/lb.

As impressive as the move in the spot price was, the performance of the juniors was truly life-changing for those who anticipated the move.

The most referenced example, because of how spectacular it was, is Paladin.

In September 2003, Paladin Energy traded for just $0.01 per share. Few had the foresight to write a check at those levels.

The premise was a simple one that just required a calculator and some patience.

Uranium cost more to produce than what it sold for… just like it does now.

Back then, uranium sold for around $11 per pound. But it cost the industry $15 per pound to produce. The math now is even more compelling.

It turned out that 2003 was the beginning of a massive bull market in uranium.

By 2005, the uranium price had climbed to $20... By the end of the year, it was selling for $35 a pound.

The masses rushed in and bought from the contrarian investors who were waiting to feed them.

As Rick Rule — who did have the foresight to write a check for Paladin at $0.01 — says: feed the ducks when they’re quacking.

In January 2005, Paladin Energy was up to $0.47. That's a 4,600% gain from 2003 levels.

By the end of 2005, it hit $2 per share… a 19,900% gain in just 30 months.

At its peak, Paladin reached a share price of over C$10.00 per share…. or a 100,000%-plus gain.

Then, in March of 2011, Fukushima happened — forcing the closure of 54 reactors and taking with them 13% of world demand for uranium.

Although the engineering and dated safety standards of the plant were to blame, uranium shouldered the blame for the meltdown.

Japan not only shut down reactors, but also scrapped plans to continue to build new reactors.

The uranium price made a U-turn.

The juniors were slaughtered.

The depressed prices and COVID forced shutdowns including McArthur River, the world's biggest uranium mine, which Cameco owns.

The world produced around 140 million pounds of uranium last year. That's down from over 160 million in 2016.

Demand was not only steady, but in the last seven years, we've seen 47 new reactors added to the grid globally — with another 54 under construction.

We are clearly looking much better on the demand side. Nuclear generation, in terms of electricity generation from nuclear power, in fact, had gone back to its pre-Fukushima levels and was higher.

The supply side of the equation — with mines shut down because of COVID and projects delayed because of low prices — has led to one of the most dynamic value propositions I have ever seen.

The smart money in the resource space is already positioning itself for the massive run.

The time to position is right now.

Why? There are several reasons.

The first being that though the uranium equities market has clearly bottomed off its lows... the spot price has barely started trickling higher. It just recently breached the $30 level.

The second is the confluence of important buyers in the space.

The biggest and most important buyers are the utilities and here’s where it gets interesting.

For years, the utilities have been able to lock up uranium supplies at depressed prices, signing long-term contracts that guaranteed the biggest buyer stayed out of the market for years.

That’s about to change. And the combination of supply cuts from the highest-margin producers and utilities coming back into the market might create the greatest uranium bull market anyone has ever seen.

You see, the utility company's price is secondary to securing supply.

That’s because the price they pay for uranium makes up a very small portion of the total cost of operating a nuclear reactor.

Uranium prices need to be north of $50 per pound. That’s the incentive price to build a new uranium mine in the world. And it goes up to $75.

No developer can bring a new uranium mine at $30 uranium. We’re guaranteed to see higher contract prices.

That’s why uranium bull markets are so violent and why the profits can truly be life-changing.

Whether they pay $25 per pound or $150 per pound… they have to buy.

With nuclear providing some 15% of global baseload — and clean! — electricity…

Either the utilities buy uranium at higher prices… or the lights go out.

When you look at the levels of uncovered reactor requirements starting next year and the year after that... every year, it gets larger and larger and larger.

The utilities' last major contracting cycle was in 2010.

Not only is the biggest buyer about to rush back into the market… but governments that just years ago vowed to move away from nuclear energy are now realizing that there isn’t a cleaner, safer, more economic option in the world.

Japan, China, India, South Korea, and even the U.S. are now fully on board with a cleaner energy future that will require uranium.

Then there’s the retail speculator, who until now hasn’t had a viable vehicle to buy uranium pounds with the press of a button or by placing a phone call.

That’s about to change. Sprott is basically launching a uranium ETF by taking over Uranium Participation Corp (TSX: U) (OTC: URPTF).

Sprott Asset Management taking over management of Uranium Participation Corp. is a big deal. I believe Sprott's 200,000-plus investors will look at this as a way to directly purchase physical pounds without having to take delivery, which Sprott will do for them.

They’ve done it with gold. They’ve done it with silver.

And now they’re about to do it with uranium.

Although the gains in the uranium spot price will be incredible... the best juniors will make those gains look paltry in comparison.

Here are the companies I’m currently recommending:

I encourage you to take advantage of the exclusive content on the site to further your due diligence and should you have any questions please reach out to us and the companies.

Prepare yourself for one of the most volatile and profitable bull cycles in your lifetime.

When assembling a quality uranium junior portfolio, you want proven management, you want safe jurisdictions, and you want exposure to explorers, developers, and producers.

Define your timeline, your risk tolerance, and the type of exposure you’d like in your portfolio and get ready for several incredible years.


Let’s Get It,

Gerardo