RE:RE:RE:RE:RE:RE:RE:RE:Meeting TodayThanks trips, I do try to put some common sense into the nonsense I often see written here. Having been in the nuclear business for well over 45 years I have picked up a few tidbits about the industry and things are often not what they seem. My technial background is nuclear engineering and I have operated nuclear reactors so kinda know the technical side pretty well.
I keep hearing this stuff about a glut of Uranium and all the above ground Uranium that will keep the worlds reactors running for years. But there was more Uranium above ground in the last run up to $140/lb so I have to conclude that it has nothing to do with the spot price. Nearly all Uranium is purchased on the long term market and I nor anyone here knows the details of those contracts. What many folks here miss is that this is a totally unique product. It is not traded like gold or copper or coal and there is no mercantile exchange yet people treat it as though it is a normal commodity....it isn't.
That means it does not react like a normal commodity to supply and demand. There are huge lags between mining and actual use in a reactor. It is these features that cause the commodity to have these dramatic bull runs..because it is largely driven by psychology - NOT supply and demand. Logic does not apply here and as soon as fuel buyers even get a hint that there is not enough uranium to be bought to run their reactors then the panic buying will start. That day is coming soon. In addition everyone thinks nuclear is finished. The media in general hates nuclear yet it supplies huge amounts of the worlds electricity. That portion is only going to grow larger as nations try to wean themselves off coal oil and gas.
So with over 60 reactors coming on line in the next five years and the key Japanese fleet steadily coming back the so - called glut of Uranium will vapourise and there will be no mines from which to get it. Many current mines are nearing the end of their life and there are so few companies in the business that once the capital flows start to move back to Uranium share prices in those companies will increase many fold. Just as happened twice before when the above ground store was much higher than today.
The key is Japan - but not for the reasons you think. All Japanese reactors need ENRICHED Uranium. That means they need to take their purchased U3O8 and convert it into UF6 and send it to a centrifuge operation to enrich it. With the requirements of Japans reactors suppressed as it has been for the last five years enrichment plants have had to resort to tailings enrichment because you cannot shutdown a centrifuge plant...it must run continuously or it is destroyed. So operators of those plants have been forced to keep them running by enriching low grade Uranium. When the Japanese reactors restart...and why I keep harping on that here - is that the enrichment requirement suddenly means that enriched Uranium will be needed for those plants and TWO things happen. The centrifuge operators overnight switch from enriching tailings (low profit) to enriching for operating plants (high profit). The spot market into which they sell their enriched tailings immediately loses a key supplier and THAT is when the panic starts. My guess is that once we have 20 Japanese plants back in business (we have 5 now with several more due this year) combined with reduced mined supply will create the shortage conditions mentioned and the price will hit the roof. I estimate this time it will hit over $200 and Uranium shares will benefit from the inevitable influx of capital. If you cannot make yourself a millionairre out of this bull market you probably should stich to bonds and debentures.
All the best and pleased you are holding for the long term. That is where the money is.....around 2020 to 2021 is when the ka ka will hit the fan.
M