US uranium plays are taking a big hit today, apparently based on a report from the Australian Financial Review that Donald Trump will not support the US uranium industry as requested in the DoC Section 232 petition.
NOTE: The facts may change materially by the time you read this, so please check my Twitter account for updates in between my formal publications.
As of this writing, I haven't found any confirmation in US press yet. In fact, the only report I’ve found so far is of a group of lawmakers urging Trump to support the petition.
It occurs to me that the report could be the result of a “short and distort” campaign by short sellers. Given the hype and deadline over the weekend, it’s a perfect set-up for that sort of criminal activity. It could also be the reverse: a false flag op by a big player who wanted to buy on the cheap. But such theorizing isn’t proper speculation, it's just guessing.
We just don’t know yet…
If the report is true and Trump rejects the Section 232 petition, it doesn't change the extremely bullish fundamentals for uranium that I outlined just yesterday.
In fact, uranium prices ticked up to $24.80 this week. I expect prices to continue fluctuating generally upward. At some point, major new contracts at the higher prices that will be necessary to cover the cost of mining uranium will result in much larger increases in prices.
That’s why I’ve written about the Section 232 petition in the US as a potential tailwind for US plays. I never said it was necessary for speculators to win on uranium, nor that it was the reason to buy uranium stocks. It was, however, a reason to act before Trump’s decision in case we did get the tailwind—and I put my own money where my keyboard is on this.
The overall story here remains on track.
If the Australian report is false, there should be an immediate and huge reversal. The Australian Financial Review does not cite any sources, so it’s hard to say how solid their information is. They merely write:
“…it is understood Mr Trump will announce shortly that he won't support recommendations from the US Commerce Department that would force nuclear power station operators to buy a significant portion of the radioactive fuel from US suppliers.”
Now, if I was sure this isn’t true, today’s price action would be a tremendous opportunity for immediate profit. Imagine the price reversal, not just from the incorrect information being shown to be wrong, but from whatever Trump does do to support US uranium producers.
But I do not know this. Maybe the Aussies have it right.
I would not gamble on the hope that the Australian Financial Review has made a mistake.
What To Do?
I wouldn’t bet on the sudden reversal scenario, but I would love to buy shares in great companies on the cheap. If I can do that because of a temporary tempest in a tea cup, while the fundamental case for higher prices ahead remains very strong, so much the better.
In short, this looks like a great buying opportunity.
But only for those with great courage and endurance. That’s because, if the report is true, the relevant stocks are likely fall further when the White House confirms it. Buying now would feel like reaching out to catch a falling knife for some time—perhaps until uranium prices really break out.
Those who take the plunge have to have a long-term outlook.
If I had money to gamble—money I could truly laugh off losing—I might buy today’s sell-off. But that would still be because of my longer-term optimism for uranium stocks. It’s even possible that Trump may find a way to postpone his decision, and all the uncertainty will linger on.
Since I have no way to know if the Australian report is true, and no way of estimating the odds for what happens next, I’m more inclined to wait and see.
If the report is true, there should be time to buy as share prices fall even lower.
And if not, I already own shares in what are in my opinion the best companies that stand to gain here.
One More Thing
Even if the report is true, settling the Section 232 question removes a huge variable from the equation for utilities that need to buy uranium. Industry insiders say that some have held off signing new contracts until the question is settled.
The end of the saga—whatever Trump decides—sets the stage for higher uranium prices.
Whatever happens next, I do see a happy ending ahead for uranium speculators.
That’s my take.