Opportunity Keeps Knockin' … Will You Answer?

Uranium hit a significant milestone this past week. The spot price of the metal rose to $27. That’s up 33% from its lows earlier this year.

Dang. What’s more, this breakout means uranium has room to run — so there’s likely more to come, even in the short term.

I can think of a lot of things investors wish had a chart that looked this good.

Now, I gave you a whole list of forces driving uranium higher in my last article on this topic. Has anything new happened since then?

Oh, yeah!

Let’s start with the fact that there was a big nuclear power conference in London. Bigwigs unveiled lots of analysis at the conference.

For example, analysts at RBC noted that Kazatomprom (the government-owned uranium company in Kazakhstan) is going to take a more-disciplined approach to production. The company now views uranium less as a resource and more as an asset to be managed. And like any investor, they want that asset to go higher.

Meanwhile, Australia’s Department of Industry, Innovation and Science forecasts that the growth in nuclear power will cause world uranium demand to rise to more than 97,000 metric tons (213.8 million pounds) by 2021-’22. That’s up 13% from today. Nice!

To be sure, that’s one estimate. One that says 60 new nuclear power plants will come online by 2020. A more-conservative estimate, from the World Nuclear Association, is that 31 new nuclear reactors will come online by 2020, for a total of 35.2 gigawatts of new capacity.

Here’s the list of new reactors from the WNA …

Even Japan — which bears the mental scars of the triple-meltdown at tsunami-struck Fukushima — is building new nuclear plants.

Anyway, the WNA’s estimate of uranium demand is also different, at 210 million pounds a year by 2020.

How can the two projections be so different? Because some analysts are betting on faster approval processes and few-to-no delays. Others look at the history of nuclear power plant construction and say, “eh, we’ll have some bumps along the way.”

But however you slice it, that is surging demand. And longer-term, the picture is much brighter.

Meanwhile, the clock is tick-tick-ticking on the Trump administration’s consideration of a trade dispute complaint by Energy Fuels (NYSE: UUUU) and Ur-Energy (NYSE: URG). They filed a complaint under section 232 of the 1962 Trade Expansion Act. They say foreign suppliers are dumping uranium on the U.S. market, purposely undercutting prices.

Since 90% of the uranium needed for American nuclear reactors comes from abroad, it could be a strategic issue. Hence, the Trump administration is putting it through the Think-o-Later.

What the two U.S. companies would like to see is some kind of set-aside or protection to increase their market share. U.S. utilities want uranium as cheap as possible, so they oppose this. But we’ll find out when the Trump administration makes a decision.

Related story: Trump’s secret order could send gold soaring

In the meantime, I can’t emphasize this enough: Even with the recent surge in prices, uranium is still too cheap to mine.

That’s why Cameco Corp. (NYSE: CCJ) shut down its huge McArthur River uranium mine. It’s cheaper to buy uranium on the spot market than to mine it. It will buy 2 million to 4 million pounds of uranium off the spot market this year, and 9 million to 11 million pounds next year.

So, of course uranium is going higher. And that’s why the Global X Uranium ETF (NYSE: URA) trading 14% below its last peak in June is a freakin’ gift.

Any of the ideas I’ve mentioned in this article will go higher with uranium prices. Which, did I mention, are going higher?

 

All the best,

Sean

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