Posted by Crux investor Get Positioned in #Nuclear Power’s Bull Run
A stealth #uranium bull market is underway. After a decade of low prices, the uranium spot price has surged 80% over the past 10 months to over $100 per pound. However, mining equities have yet to reflect this new reality, presenting a window for investors to profit enormously from the coming supply squeeze.
1. Nuclear Reactor Construction Booming
Over +50 new reactors are under construction globally, concentrated in China and Asia. These will require a major uranium supply to fuel decades of electricity generation. China & US must lock-up contracts now to secure future needs as demand swamps stagnant mine output.
2. Chronic Underinvestment in New Mines
The 2011 Fukushima tsunami scared uranium explorers and developers. New mine investment dried up with low prices. But with reactors being built, sub $30 prices were unsustainable. Margins are improving to incentivize production, but few advanced projects exist to fill widening shortfalls as secondary supplies decline.
3. Inventory Stockpiles Shrinking
Utilities and speculators have consumed inventories, leaving thin buffers. Uncovered demand now pressures primary production. Further inventory liquidation exacerbates volatility.
4. Supply Shock Catalysts Mount
Mines face depletion while legacy long-term deals from the bull market end. Top global producer Kazatomprom’s output cuts remove 25 million lb through 2024. More losses loom with contract expiries. Supply shocks type stories.
5. Equities Severely Undervalued
Miners must rally huge just to restore historical fair-value ratios relative to rising uranium prices locked-in by utilities. Juniors possess the greatest leverage from exploration discoveries as sentiment shifts. Deep value persists after early 2023 gains.
Uranium equities look ready to rip given demand increasing against unreliable capacity. Nuclear power is essential for global emissions reductions. Investors have an extraordinary opportunity to buy into this narrative before market comprehension. The supply/demand trajectory suggests at least a doubling from current spot levels exceeding 2007’s prior peak. Stocks should offer multiples of that move. Consider having uranium equities in your investment portfolio.