...about uranium in general
-stolen from another board but makes key points about the sector:
One of the things that’s interesting is that, although new plant construction is not progressing well in Europe and North America, it is progressing better than I had anticipated—and I was bullish—in East Asia. New plant construction in the People’s Republic of China, South Korea, Japan and Taiwan is progressing well despite the fact that the long-term prognosis for uranium doesn’t supply existing plants, let alone new plants. That sets up an interesting paradox in uranium; if you’re building or financing a plant now, what you have to do to secure financing of the plant is obtain long-term contracts that give you enough uranium supply to amortize the loan out over 15, 20 or 30 years or for the duration of the term. Interestingly, that means the long-term price of uranium (i.e., contracted uranium prices) is above and sometimes substantially above the spot price; thus, uranium consumers are paying a premium over market to lock in long-term supplies. This is important because for the first time in my career, relatively small companies that make a significant uranium discovery can finance the discovery into production without selling it to a multinational mining company because these consumers—large power companies and utilities—are willing to assist in financing the mine in return for an offtake agreement. This is a game-changer for the uranium exploration sector.
The second thing that makes uranium particularly attractive to me is that vast amounts of money were raised in the stupidity of the uranium bull market that occurred four–five years ago. As is normal, most of the money was wasted but some was spent intelligently. As a result of the 25-year bear market that existed in uranium prior to the bull market, not much exploration had been done for 25 years. Consequently, there was lots of low hanging fruit and the money that was raised has begun to find it. That means we’re in a discovery cycle in uranium at the same time the long-term outlook for uranium producers is the brightest it’s been in my 57-year lifetime. This is a very bullish set of circumstances looking forward—just 50% less bullish than it was six months ago because the price of admission has gone up.