Uranium Energy Corp UEC

🧑‍🏫If U are a newbie to #investing in #Uranium #mining #

[mangoe]

John Quakes

@quakes99 -

If U are a newbie to #investing in #Uranium #mining #stocks and don't have time to read thru my refreshed bull market investment thesis then here is a brief recap for U to try to bring U up to speed.

In 2011 the #Nuclear incident at Fukushima led to Japan shutting down its entire fleet of 54 reactors. This created a massive Uranium supply surplus that drove the price of mined #U3O8 down to less than $18/lb by 2016 as Kazakhstan, at the same time, was ramping up its mines to become the world's largest Uranium producer with the lowest operating costs. Russia was also decommissioning old Soviet-era Nuclear weapons to produce 20 Million lbs per year of U3O8 that was powering nearly half the US reactor fleet until that 20-year program ended in 2013.

The Spot U3O8 market was awash with cheap Uranium coming from Kazakhstan and Russia while at the same time Nuclear utilities were seeing the world turn against Nuclear power. Uranium supply models projected falling demand in an era of excess supply. Nuclear fuel buyers cut back on signing new long term contracts, choosing instead to rely on carry traders who were buying up cheap Spot lbs to resell at higher prices in short-term contracts. Uranium producers were getting the shaft!

As a result, many operating Uranium mines were shut down, new mine projects shelved, and major producers Cameco and Kazatomprom scaled back their production, putting mines into care & maintenance while waiting for Uranium prices to pick up again. Investment in the Uranium space fell off a cliff.

Then everything changed on the Nuclear demand side. China embarked on a massive Nuclear expansion program. France and South Korea reversed their plans to phase out their nuclear fleets. Japan began restarting many of their idled reactors. Climate change and extreme weather led to a resurgence in the only safe, reliable 24/7 carbon-free power source able to support a new global goal of NetZero emissions by 2050. A very expensive failed attempt by Germany to switch from Nuclear to solar & wind highlighted that foolish strategy to other nations watching. Thanks Germany!

All of a sudden a new paradigm emerged that put a high value on keeping existing reactors running for decades longer while looking to triple Nuclear power generating capacity by 2050. But Uranium's not ready!

Demand for Uranium fuel is surging but it takes many years, sometimes more than a decade, and massive capital investment to restart idled uranium mines and bring new mines into production. Years of under-investment in mine development and exploration is taking its toll. Supply is unable to adequately respond to accelerating demand, no matter how high Uranium prices go!

Then, in February 2022, Russia invaded Ukraine triggering a global shift to embrace Nuclear energy for energy security. Prices for Uranium enrichment and conversion have soared to new all-time record highs as the West pivots away or outright bans the use of cheap Russian enriched Uranium. Signing contracts for mined U3O8 to feed conversion & enrichment is the last link in the Nuclear fuel supply chain. The price of Uranium has quadrupled from $20 in 2016 to $80 today, but still lags the leading indicator prices of conversion and enrichment stages of the fuel cycle. Triple-digit Uranium prices are on the near-term horizon!

A lack of sufficient new mines to meet new demand, and the very slow process to restart idled mines, has pushed the Uranium market from oversupply into a deep structural supply deficit that is now set to last well into the next decade.

There is no longer any path to rebalance supply to meet rapidly soaring reactor fuel demand this decade. Nuclear utilities expected Kazakhstan to simply ramp up production to flood the market, but they've done the opposite... cutting production, reducing guidance, raising taxes and cashing in on higher prices rather than increasing mine output. Access to cheap Russian lbs is coming to an end. Welcome to the western Nuclear fuel buyer's nightmare!

Now, to cap off the story, not only is the world embracing a plan to triple Nuclear and Uranium fuel demand by 2050 but there's a new source of Nuclear demand stemming from the Artificial Intelligence revolution bringing an unprecedented need for massive amounts of clean, 24/7 carbon-free electricity to power a global expansion of power-hungry big tech AI data centers.

Uranium supply/demand models have to be completely revamped to include all this new demand which was never anticipated. Nuclear fuel buyers have been twiddling their thumbs hoping Uranium prices would fall back down to $20 again but that ain't happening now so they MUST come to the market and sign contracts for an estimated 2.1 Billion lbs of fuel requirements to keep their existing fleets operating to 2040. That doesn't even take into account the Small Modular Reactor build-out on the horizon to decarbonize many other industries and transportation. Nor does it include the new demand from tripling current Nuclear power generating capacity.

There's a new Uranium Renaissance underway but insufficient new mined supply in the West to meet the soaring demand for Western reactor fuel. Thus we are in a strong Uranium bull market with many years yet to run that, like the 2005-2007 bull market, will be further boosted by hedge funds and other financial players when they enter the sector to drive up Uranium prices in order to rake in huge profits from Uranium stocks. Now's your chance to get in before the big money shows up! The best is yet to come! Cheers!