This week’s spot uranium price held even at US$26.10 per pound. I’m very pleased.

I have long been confident that higher uranium prices are a “when, not if” question. As you may have seen in last Thursday’s Speculator’s Digest, I think “when” has become “now” for uranium. Here’s why.

First, there’s uranium’s price history.

  1. In the first decade of this millennium, the world woke up to the fact that it needs nuclear power. The entire conversation shifted as people of different political bents around the globe realized that nukes don’t dump carbon into the atmosphere and can be built anywhere. Even China, one of the world’s worst polluters for decades, understood that it has a serious problem and it needs to stop burning so much coal. It was a great, true story, and uranium prices went vertical in 2007.
  2. But it was too much, too fast. Uranium prices corrected dramatically. That was no surprise and a reasonable market response. Prices fell to near the average cost of production.
  3. The pro-uranium narrative took hold again. China announced plans to build scores of nuclear power plants. Other countries followed suit. Prices started soaring again. Then the Fukushima nuclear disaster struck, abruptly halting uranium’s rise. Prices have been sliding pretty much ever since.
  4. Prices were down, but the narrative remained strong. Germany decided to move away from nuclear power, but more reactors were being built worldwide than shut down. Even the Japanese were facing the fact that they have to have nuclear power and will need it for decades to come. Prices rallied again, but then started falling as cash-strapped Japanese utilities sold excess uranium stocks they weren’t going to need for years, if ever. This relentless selling pushed spot uranium prices well below the cost of mining the stuff.
  5. The narrative hasn’t changed. The world still needs nuclear power plants. China, India, and other countries are building scores of them. Even the US is looking to build its first new nukes in decades. But uranium prices continued scraping along the bottom, under relentless pressure from secondary supply from Japan hitting the market at fire-sale prices.

This brings us to now. It’s a terrible time to be a uranium miner. And that means that low prices are in the process of becoming the cure for low prices.

The pivotal facts are:

A) Uranium cannot be substituted for in less than decades.

B) Uranium cannot be mined profitably at current prices.

The world’s uranium producers are in dire shape. Even the best of them—Cameco and Kazatomprom—are shutting down production in response to lower prices. That includes flagship mines like Cameco’s high-grade McArthur River mine.

Uranium is selling so cheap, miners with long-term contracts at higher prices are buying uranium at spot and selling that to their customers instead of mining. As crazy as it sounds for uranium producers to be buyers, it makes more sense than spending more money mining and depleting their assets in the ground.

This cannot and will not last.

Even the companies with the best new projects are in no hurry to advance them toward production.

Note that the cost per pound of production in the chart above is a cash cost figure, not an all-in cost. You can add 50–100% to the bars above and still get a conservative estimate for how high uranium prices would have to go for these projects to be profitable.

Meanwhile, the two facts remain: the world needs uranium; and it’s not going to get it at current prices. Something needs to give.

But why do I think uranium’s dawn is finally here? In part, it’s the most recent price action. Let’s zoom in on the last couple years.

As you can see, the current high is higher than the two false dawns we’ve seen since the bottom in early 2016. That makes it particularly good news that uranium held on to last week’s high this week. In the last two rallies, it retreated from its peaks. Perhaps more significantly, we’ve seen higher lows since the bottom as well.

A critical fact regarding this year’s rally is that the Japanese have announced plans to restart nine nuclear power plants now, and 21 more over the next decade.

Another very important point is that uranium’s fundamentals are almost completely insulated from the general drivers of the commodities markets. The trade war won’t keep uranium prices down. The new US move toward supporting domestic production may boost US uranium plays, but it won’t hurt others.

There’s significant potential for near-term weakness in other metals and resources, but uranium is on its own trend path—and it’s upward.

Uranium has already dropped below “stupid cheap,” and has more imminent upside than downside. All of its indicators are pointing upward.

Uranium stocks are the only asset of any kind that I can think of for which this is true.

It’s a terrible time to be a uranium producer, depleting assets at stupid prices. It’s a great time to be a uranium explorer, adding pounds in the ground while they’re cheap. Once the coiled spring releases, the results should be spectacular.

The triggering conditions I had set for my own re-entry into this space were uranium prices rising above $25—and staying there. That’s exactly what’s happening now.

Let me be as clear as I can on what this does and does not mean:

Best of all may be that most of the quality uranium plays on the market today have yet to respond to the latest increases in uranium prices. I attribute this to sector-wide panic and capitulation, rather than anything to do with these companies. That’s an opportunity—one I am putting my own money into.

Which do I like best? With respect, that’s what readers of The Independent Speculator pay to know. But you have my take on the market. You can conduct your own due diligence and place your own bets. Or join me and put my experience to work on your behalf.

Either way, stay disciplined in your diligence and decisions, and I’m sure you’ll do very well.

Wednesday, August 22, 3:43pm, EST, 2018