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Uranium Price Update

Uranium prices continue to get compressed towards $0, as a few week hiatus of the blood was met this morning with the first real print in weeks – and it was an ugly one.

My impression is that the uranium market has been dead for months now, while the major players of nuclear utilities and uranium cake producers play a game of chicken with one another. And unfortunately, because nuclear reactors can run so long without refueling, this game can go for a long, long time.

I’ll take a moment to remind you of advice I’ve given before; every now and again it needs to be repeated.

Stay out of the small uranium miners.

Just because I like CCJ does NOT mean I like CCJ’s half-starved siblings. CCJ has a war chest and controls 20%+ of the market. CCJ’s competition sometimes isn’t even producing uranium. If you’re not playing the waiting game with a billion dollar budget, at minimum, I hate to tell you this pal…but you’re prey.

I’m in CCJ from the onset because I know how this ends; countries are not going to diversify away from nuclear power. That would be stupid. However, that doesn’t mean Japan wouldn’t like very much to see its public utilities able to load up on fuel contracts at dirt cheap prices. Or that every other reactor globally wouldn’t like to devour Japan’s reactor fuel should they be forced to market.

In the meanwhile, without a price recovery, CCJ’s stock is going to be horrible. $13 is not out of the question. But they’ll survive, and if you think they have pricing leverage at 20% market share, well…it’s only going to get more ridiculous.

I will buy my next batch of $CCJ if it hits $15.

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Shinzo Abe Is Coming

While the Fly is busy over on his blog heralding the great Japanese revival, and the massive stimulus efforts the new/old government is bringing to the table, I am welcoming them for a different reason.

Their new prime minister Shinzo Abe is a nuclear man at heart, and he has commanded in no uncertain terms, “restart these fucking reactors, right now.” Abe will not stand for the masterful achievement of his party, the conversion of Japan to nuclear energy over the last 50 years, to be left by the wayside. Particularly if he hopes to stand up to the Chinese, he needs those reactors, or else Japan will be slapped around by a torrent of fuel supply issues and Chinese mainland fuckery.

If the uranium markets can just clear out some of the U308 glut, we can get some price stability. Brokerage in these kinds of zero volume markets are frustrating, as now the long term price of $60 that had held up so well appears to be breaking. If that happens, I have no reservations about saying CCJ will re-re-test the lows.

That would be about the most aggravating thing imaginable.

But outside of these petty price battles, the fundamentals for uranium and the miners are clearly shoring up. Even without a dramatic rebound from Japan nuclear demand, it is only a matter of time before existing market supply is swamped out.

Read here:

This past year may have been a sour one for uranium spot prices, but 2012 brought many positive developments for market fundamentals — especially in the second half of the year. Industry analysts see these developments as early signs of a crucial turnaround for uranium spot prices and uranium mining shares.

The uranium market has been on a long and bumpy ride to recovery since the 2008 financial crash crippled the commodities sector. Throughout the second half of 2010, investors cheered as the U3O8 spot price surged more than $30/lb, eventually hitting a pre-crash high of $72/lb in January 2011. However, the industry fallout following the Fukushima Daiichi nuclear disaster in March of that year wiped out most of the rally’s gains and spot prices remained range-bound, between $49/lb and $52/lb, for nearly a year.

In 2012, uncertainty was the dominant factor affecting spot prices. Previously nuclear-reliant nations like Japan and Germany signaled that they might be winding down their nuclear programs, while the potential that offloaded supply could flood the market made many buyers hesitant to buy at $50/lb, driving short-term spot prices down to $40/lb early in the last quarter.

The most significant development in 2012 came last month, with the pro-nuclear Liberal Democratic Party’s landslide victory in Japan’s federal election. That indicates that there will likely be a faster-paced restart program for the nation’s 48 inactive reactors.

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BOOM! Uranium Spot Price Recovery Continues

I just managed to get around to checking the weekly U308 numbers. The price recovery continues, germs.

Spot prices are up another 1%+ this week, now nearing the $45 /lb price. Long term prices remain pegged at $60.

This is your last warning. All who oppose uranium are about to be offered up for slaughter. Your weregild is cheap, and CCJ will offer no quarter.

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Cameco Corporation’s Time Has Come

I had a wonderful four day weekend, which culminated in a celebration. I would share that spirit with each of you on this fine evening. I hope all is well wherever you are.

Catching up on today’s action, the signs are beginning to shift to CCJ’s favor. The stock rallied another 3.7% today.

This is a long awaited development.

Back in early 2011, after the Japan earthquake set off the greatest nuclear threat since 3 Mile Island, sheer panic had set in the public broadcasters. I watched, amazed, as men and women with no special understanding of nuclear power drowned out actual industry experts on live television with their warnings of calamity and doom.

No claim was too exorbitant. The calls for widespread death and pestilence were matched only with the audacity of the foregone conclusion that nuclear energy must be completely dead.

I let my pipe burn out, tasting only the lingering roast of the cayuga, as I shook my head in disbelief at this spectacle…

And then, I laid my reputation on the table and began slowly accumulating shares of CCJ, right in the midst of the panic as a nuclear reactor literally melted down on international television.

Now, this is actually the second time I’ve seen a strong resurgence in CCJ’s stock price, leading me to believe in the possibility of a price recovery. The stock had hit the mid teens earlier, and after that discernable bottom, I thought perhaps those days were past. Alas! It was not to be. CCJ’s shareholders proved themselves cowards with the recent collapse of U308 spot prices; incapable of seeing the greater theme.

This rally could be just another such fake. Yet, I have reason to believe it is not. There is great timing of the move, which coordinates with significant developments in the uranium space. Japan has announced they will fast track a discussion of nuclear energy – I believe they have no choice but to continue on the path. Germany (which previously announced a full scale out of nuclear power) has made decisions appertaining to their grid which make abandoning nuclear power impossible. The US has been rather cheerful about nuclear, finally giving permission for the construction of the first new nuclear power plant in decades. China is pushing full steam ahead. India has signed fuel trade agreements with Canada. And Russia is done flooding the markets with HEU from decomissioned warheads.

Whether or not this is the triumphant finale to my symphony remains to be seen. I wait with bated breath.

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Fixated On A Catalyst

There is only one number I’ve come to stare at every week, and that’s the published uranium spot price. It’s up over 7% in the last month.

It’s astounding, really. I know that the number has absolutely no bearing on CCJ’s operations, whatsoever.

But I am convinced that the number has a very meaningful impact on CCJ’s stock price.

For some reason, humans are always on the lookout for “a reason”. The quest for this unattainable cause has destroyed men. It has brought nations to their knees. It has set killers free and thrown the innocent behind bars.

And now, there are potentially millions of dollars waiting for “a reason” to buy CCJ.

I don’t get it. I mean, if CCJ is a good buy, why not just buy it? Why wait for “a catalyst.”

If you suspected that your gas line was faulty, would you wait for the presence of “a catalyst” to fix it? Would you wait until lethal and volatile gas was flooding your home to patch up the issue?

“Mmm, no sir, that is simply preposterous,” you remark while stomping your foot on the ground. “I believe I need a catalyst before I move to fix that gas line.”

“Now please remove yourself from my study, you charlatan salesman. It is almost noon-thirty, a time each and every day when I practice the ritual of smoking my pipe.”

Hell no. If you saw there was a problem with one of your lines, you wouldn’t care what the expected life of a gas pipe was, or the statistics of an explosion in an average home, or presumably would you wait until your house was the ideal location for a life shattering explosion.

You’d step in and fix the damn thing.

But that’s not how the mentality works in markets. When you spy misallocated risk in market, for some reason totally unknown to me, the accept response is, “We wait, good sirs. We wait until the moment when it’s probably too late to act.”

“We wait for the signal.”

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Just A Matter Of Time For CCJ

I’ve been holding CCJ basically since that reactor went critical in Japan. In fact, the only reason I bothered to purchase CCJ was BECAUSE of the reactor.

As an observation, in the face of natural disasters, people are horrible at honestly judging a situation. They ALWAYS skew to the pessimistic, end-of-the-world viewpoint. And especially with radiation, where the radiation level does not even determine health risks so much as radiation-time, people get goofy.

Case in point: I say to you, “you’ve been exposed to ‘high’ levels of radiation for a few hours.” Let’s suppose that “high” is around the range where death becomes 50/50 according to statistical observation. Rank the following outcomes in terms of likelihood: Death, cancer, sickness – no cancer, and no impact.

Most people, upon freaking out at this statement, would immediately order these outcomes in terms of the fear they have to them – death is most likely, followed by them developing a cancer, followed by them only getting sick, and finally leading off with them scraping by unscathed.

In reality, this is completely wrong.

When exposed to high levels of radiation, the most likely outcome is cell death; since we’ve already specified 50/50 chance of mortality, this is the highest outcome (as all others must fit inside 100% probability), followed by sickness without cancer (survivable cell death), and finally followed by no impact occurring.

The likelihood of developing cancer from 1 hour of exposure at any magnitude of radiation remains effectively the same – zero (this is not to be confused with the implications of absorbing radiating materials into your body, which is why unprotected exposure to radioactive materials is frequently associated with cancers).

This is a good example of panic creating opportunities. The fact that none of the Japanese workers have died from radiation is indication that they will be alright and a reminder that nuclear energy, while complex and potentially dangerous, can be managed safely.

Other examples include the Macondo well in the Gulf of Mexico, the threat of an Iranian blockade of the Hormuz Straight, the impact of peak oil on net global oil supplies, the relevance of the Y2K bug to global finance, etcetera.

Now, I will demonstrate first hand again the kinds of profits that can be made by keeping a level head when “freaking out” is the cool thing to do.

You see, CCJ’s price has been lackluster of late, to say the least. Yet, I continue to hold it after purchasing logarithmic intervals from the entire spread of $29 all the way down to $17. It comprises an enormous portion of my allocations (just under 20%).

But that is about to change.

In a matter of months, Russian recycled nuclear warheads will stop entering the marketplace as fuel. At such point, current uranium production is insufficient to maintain current fuel demands of all global reactors.

And the number of those reactors is increasing – not decreasing.

Germany’s promise to switch from nuclear fuel to alternative energy sources is weak. They have no chance of accomplishing this…nadda, zilch, zero. The technology does not even exist is terms that could make this possible, at this time.

And Japan will not be decommissioning any of their own reactors, despite public mood on the subject.

The reason they cannot do this is China.

Japan is an island nation with few natural resources. The majority of their consumption comes from abroad. The whole reason they went nuclear to begin with was to create a quasi-self-sufficient power grid for the country. The major catalyst for that choice was fear of China’s naval capacity.

Your standard nuclear plant can run for upwards of 500 full power days before needing to reshuffle the fuel rods. That’s a year and a half of power, without fear of supply disruption.

If Japan were to start converting away from nuclear, it would expose itself to two risks it currently doesn’t have: the first is daily fluctuations in the price of fuel (all of which it must import), and second, the risk that China tries to blockade their supply routes.

If Japan made the switch, and China ever decided to interfere with them, then they would have literally a few months to respond before watching their entire grid fault out. Nuclear gives them options to respond to military provocations – as the Chinese have so kindly reminded them of.

Uranium is set to soar, and CCJ is the biggest beneficiary. By this time next year, I will be insufferably gloating.

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