Hi everyone,
Now that the FED announced their interest rate decision, we can again look beyond that...
For those interested. No need to rush. Take time to double check the information I'm giving here, before potentially doing something.
A. Kazatomprom announced a 17% cut in the hoped production for 2025 in Kazakhstan, the Saudi-Arabia of uranium + hinting for additional production cuts in 2026 and beyond
My previous post of 21 days ago explains this more in detail:
Keep in mind: Kazakhstan is the Saudi-Arabia of uranium. Kazakhstan produces around 45% of world uranium today. So a cut of 17% is huge. Actually when comparing with the oil sector, Kazakhstan is more like Saudi Arabia, Russia and USA combined, because Saudi Arabia produced 11% of world oil production in 2023, Russia also 11% and USA 22%.
Conclusion of previous post:
Kazatomprom, Cameco, Orano, CGN, ..., and a couple smaller uranium producers are all selling more uranium to clients than they produce (Because they are forced to by their clients through existing LT contracts with an option to flex up uranium demand from clients). Meaning that they will all together try to buy uranium through the iliquide uranium spotmarket, while the biggest uranium supplier of the spotmarket has less uranium to sell.
And the less they deliver to clients (utilities), the more clients will have to find uranium in the spotmarket.
There is no way around this. Producers and/or clients, someone is going to buy more uranium in the spotmarket.
And that while uranium demand is price INelastic!
And before that announcement of Kazakhstan, the global uranium supply problem looked like this:
B. September 10th, 2024: Kazakhstan starting to tell western utilities that they will get less uranium supply then they hoped
C. Putin suggesting to restrict uranium supply to the West
To give you an idea:
A. 70% of world uranium consumption is in the West (USA, Canada, Europe, Japan, South Korea), while only 40% of world uranium production ( comes from the West and Africa combined.
In other words most of uranium comes from Asia (Kazakhstan, Russia, Uzbekistan and China): 29,400 tU in 2022
Total operable reactors in the West: 280,551 Mwe
Total operable reactors in the world: 395,388 Mwe
This threat from Putin alone is sufficient for western utilities to lose the last perception of security of uranium supply
B. Russia is an important supplier of uranium and even more of enriched uranium for Europe and USA.
The possible loss of Russian enriched uranium supply is actually a bigger problem, because Russia is responsible for ~40% of world enrichment services. The biggest part of uranium from Kazakhstan and Russia for Europe and USA is first enriched in Russia.
Uranium to Europe:
Uranium to USA:
C. And besides that. There are 2 routes for uranium from Kazakhstan to the West: the Saint-Petersburg route and the Caspian route
But Kazaktomprom just said that the Caspian route was much more costely and that the supply of uranium to the West has become very difficult.
Because most Kazakhstan uranium destined for the West gets enriched in Russia first, Putin is in fact not only threathing russian uranium but also uranium from Kazakhstan
When looking at the numbers, this threat is an electroshock for Western utilities (USA, Europe, South Korea, Japan)
Utilities will assess this additional news now, and most probably accelerate and increase the uranium purchases in coming weeks and months in preparation for possible export restrictions by Russia for uranium.
Important comment 1: In terms of revenue, uranium and enriched uranium revenues are significantly smaller than their oil and gas revenues. And with a higher uranium price due to russian restrictions on uranium supply to 70% of world uranium consumers, Russia will be able to sell uranium at much higher price at India, China, ...
Important comment: The uranium spotmarket is not like the copper, gold, oil market.
a) The uranium spotmarkte is an iliquid market. Sometimes you don't have a transaction for a couple days, so an uranium spotprice not moving each day in the low season is normal. In the high season the number of transactions increase in the uranium spotmarket.
b) The uranium spotmarket doesn't react instantly on news, like a liquid copper, gold, oil market does. In the uranium sector the few actors with access to the uranium spotmarket take their time to analyse data before starting to act. But ones they start to act it goes very fast
D. Undervalued compared to the intrinsic value
Sprott Physical Uranium Trust (U.UN and U.U on TSX) is a fund 100% invested in physical uranium stored at specialised warehouses for uranium (only a couple places in the world). Here the investor is not exposed to mining related risks.
Sprott Physical Uranium Trust website:
Sprott Physical Uranium Trust is trading at a discount to NAV at the moment. Imo, not for long anymore.
A share price of Sprott Physical Uranium Trust U.UN at ~25.37 CAD/share or ~18.72 USD/sh gives you a discount to NAV of 4.50 %
An uranium spotprice of 120 USD/lb in the coming months (imo) gives a NAV for U.UN of ~40.00 CAD/sh or ~29.60 USD/sh.
And with all the additional uranium supply problems announced the last weeks, I would not be surprised to see the uranium spotprice reach 150 USD/lb in Q4 2024 / Q1 2025, because uranium demand is price inelastic and we are about to enter the high season in the uranium sector.
A couple uranium sector ETF's:
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Sprott Uranium Miners ETF (URNM): 100% invested in uranium sector
-
Global X Uranium ETF (URA): 70% invested in uranium sector
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Sprott Uranium Miners UCITS ETF (URNM.L): 100% invested in uranium sector
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Sprott Uranium Miners UCITS ETF (URNP.L): 100% invested in uranium sector
-
Geiger Counter Limited (GCL.L): 100% invested in uranium sector
Uranium Royalty Corp (URC / UROY): the only Royalty and streaming company in the uranium sector physical uranium and annual uranium deliveries from current productions
Note: I post this now (at the gradual start of high season in the uranium sector), and not 2,5 months later when we are well in the high season of the uranium sector. We are now gradually entering the high season again. Previous 2 weeks were calm, because everyone of the uranium and nuclear industry was at the World Nuclear Symposium in London (September 4th - 6th, 2024), and the week after the utilities started assessing all the new information they got from Kazakhstan, Russia and the WNA Symposium. Now they are analysing the market again and prepare for uranium purchases in coming weeks and months.
For those interested. No need to rush. Take time to double check the information I'm giving here, before potentially doing something.
This isn't financial advice. Please do your own due diligence before investing
Cheers
