Lingering Questions On The Uranium Market

The uranium space ripped to the upside today. It was led by URA as the specter of a uranium price bottom led speculators into the miners. Several of the smaller names doubled, and even Cameco experienced a 3% upside day.

The actual story is decidedly more complicated.

Uranium prices at a few of the brokers I keep tabs on have actually begun to crack lower. The reports are that 8 separate utilities arranged deals at low prices last week and threats of funding and fears of even lower offers led the small names to cave into demands and sign contracts.

This is why I have avoided small cap uranium miners, like foreigners in France around 1349.

What comes next depends. Fears surrounding Japanese policy could be taking root. If those are grounded, then we may have quite a bit of trouble on our hands. Any such trouble would be viewed, from my perspective, as a buying opportunity. However, a rehash into the $10-20’s would not be out of the question. At current demand and sales, I put CCJ at $13, roughly.

However, if Cameco and the other miners can band together, they may be able to strike back against the weak hands that are presently caving. Cameco is in the distinct advantage of controlling more than 20% of the global market. If they can leverage themselves, banding together some of the smaller survivors, they could create a strong floor, devouring the weak in the process at rock bottom prices.

Longer term, the uranium market remains ripe for picking. There are several trends I am seeing that could lead grid demand to pick up 10-20% just here at home, at minimum, over the next one to two decades, and no real positive supply growth to see yet. Couple that with continued demands from environmentally conscious politics to trend away carbon emitting fuels and the necessity of alternative energies like wind or solar to be supplemented with constant energy sources and a build out in nuclear power is an obvious go to.

Thus far, there is no word on Russia extending the HEU agreement. The moment will be dominated by Japan. The decade won’t care about Japan at all.