Commentary and analysis on markets, personal finance, and wealth building from a contrarian perspective. "I believe in the discipline of mastering the best that other people have ever figured out. I don’t believe in just sitting there and trying to dream it up all yourself. Nobody’s that smart."
— Charlie Munger
The long-held theory during the prolonged mining sector
slump was that Uranium as an energy metal could potentially break away
irrespective of the rest of the metals space. How true they were, but not in
the way they intended, for just as the mining space has broken out of its swoon
the Uranium price has not only been left behind but has gone into reverse. This
is truly dismaying for the trigger for a uranium rebound was supposed to be the
Japanese nuclear restart and yet it has had zero effect and indeed maybe has
somehow (though the logic escapes us) resulted in a lower price.
The yellow mineral had made fools and liars of many in
recent years, including ourselves. That said, every dog has its day and some of
the things that weighed on the uranium price (most notably the Japanese plant
shutdown) are retreating as issues. At the risk of being made to look foolish
again, we think the tide has turned for Uranium and would not be surprised to
see it close to $40 per lb by year end and break through $50 per lb by the end
of next year. (skip)
Is there a trend in the uranium space beyond the ever lower
spot price? We believe that, yes, there is. Quite clearly exploration
(anywhere, but the Athabasca) is for the birds. The market won’t fund it and
investors won’t give credit for whatever you find.
Further on in the article the author compares uranium investors to Moses in the desert for 40 years. I thought that was amusing however in the end, and as I have noted in the past, the current price will not stimulate the building of new uranium mines. As the article notes the emerging markets are building many new nuke plants. Eventually the price will have to rise to stimulate investment in sufficient supply. The lesson is timing is always important. Nevertheless, the eventual rise of uranium prices is a when event and not an if event.
This chart says it all about future uranium demand
Note that only 2.4% of China's electricity supply is nuclear. Lots of room for growth. Also note the number of reactors planned and proposed.