Readers have asked about reports that uranium extracted from phosphate fertilizer could impact the price of uranium. The thrust of these reports is actually that proposed changes in international standards could make it easier for countries without nuclear weapons to more easily get their hands on “under the radar” uranium. Such supplies could be used for secret weapons programs and set back anti-proliferation efforts.
Apparently, the biggest uranium-rich phosphate deposits in the world are in Morocco, followed by Mexico, the US, and South Africa. Of greater concern are deposits in Syria, Egypt, and Jordan. That’s understandable. Brazil and Colombia make the list as well.
I can’t really say how serious a concern this is. I’m no expert on nuclear weapons proliferation. But I don’t see any way the UN or anyone else is going to stop countries from mining phosphate fertilizers. It seems to me that this is a matter of reporting. It’s the “under the radar” part that’s the problem. And that is something the UN can do something about, if the international community consensus is that this really is a problem.
What I don’t see is a flood of cheap uranium extracted from fertilizers swamping the market.
We’re talking about very low concentrations here. If the phosphate in question were seriously radioactive, no one would mine it, buy it, or use it as fertilizer. This is not an economic source of uranium—or it would already be mined this way. And the whole concern is that certain bad actors want to get hold of uranium, not sell it.
If anything, I’d see this issue as a threat to phosphate miners.
If countries with clandestine weapons programs ramp up their phosphate consumption just to get uranium, what are they going to do with all the fertilizer they don’t need? Dump it on the market.
What’s more, this proliferation angle seems likely to be a sideshow at most, with the US and Russia visibly headed for a new nuclear arms race. Military organizations aren’t going to report their uranium purchases, stockpiles, or enrichment capabilities to the public. That means that increased military demand isn’t going to be something investors can time or track.
Military demand is, however, something speculators can bet on.
The beauty of this is that, like the Section 232 issue in the US right now, if nothing happens, there’s no downside. The fundamentals tell us that, barring some cataclysmic event, uranium prices must rise. If US and Russian militaries start taking more uranium off the market, that only helps. If they don’t, no matter; the fundamentals are still good.
Is there an ethical issue here? Not for me. I’m not investing to build bombs. I’m investing to keep the lights on. Whatever the world’s militaries do, that’s beyond my scope and responsibility.
One more thing.
My favorite aspect of the case for speculating on uranium stocks today is that it doesn’t depend on the global economy doing well this year. Not so for other energy minerals—even the ones that are in short supply and are essential for the booming battery business.
Conversely, the bullish case for uranium prices doesn’t rest on the global economy deteriorating or crashing. Not so for a breakout in precious metals, which really needs the US dollar to tank, the markets to crash, or some other shock to the system to put fear back in the driver’s seat.
I’m not saying I’ve turned bearish on precious metals or other energy minerals. I’m just saying that what I like about uranium is that I don’t have to guess what will happen in the global economy this year in order to win.
If I’m right, higher prices are baked in the cake, regardless.
And if I’m wrong? Well, I like the uranium story a lot, but I never put all my eggs in one basket. It’s good to be diversified.
That’s my take.
