Yellowcake is a concentrated uranium powder that is the intermediate
step between mining ore and before fuel fabrication or enrichment. Uranium is mined out of the ground, processed
into yellowcake, then further processed to make nuclear power fuel or nuclear
weapons.
75% of the world’s uranium is found in Kazakhstan (40%),
Canada (13%), Australia (12%), & Namibia (10%). Roughly 65% of all uranium production comes
out of 6 mines. The remaining 25% is
spread out over 16 countries.
So, what makes uranium such a great investment? Well, outside of its capabilities to make
weapons, uranium is an important part of nuclear energy. 1 kilogram of uranium-235 can theoretically
produce 20 terajoules of energy. To
create an equivalent amount of energy from coal would require 1.5 million
kilograms.
So obviously, there’s a lot of energy creation
potential. Now the world has fallen in
and out of love with nuclear power over the years. Its last big run was in 2006 when the price
per pound of uranium hit $140. Unfortunately,
there was a nuclear disaster at the Fukushima Daiichi power plant in Japan in
2011. Power plants and projects were
reevaluated after this and many were cancelled.
Currently uranium sits at $31.60/lb.
In fact, the price was range bound at $24-26 for years causing miners to
abandon expansion projects. Miners also
mothballed exploration and development.
This lack of research and development is one of my catalysts for buying
uranium. This lack of R&D leads to
shortages and shortages lead to price increases, causing R&D to come storming
back.
Another catalyst for uranium is China. China wants to produce 28% of their
electricity from nuclear power. The
current amount produced is 4% from 45 nuclear reactors. Also, China’s energy consumption is 7.3 PWh
(that’s petawatt hours). For comparison,
the US is at 4 PWh with 94 commercial reactors.
Also, the technology to build these nuclear power reactors
has improved greatly in the past 5-10 years.
These reactors are becoming more efficient and safer. The industry has really suffered greatly from
bad press and they are determined not to suffer any more setbacks. Safety is a high priority for newly built
reactors and power plants.
Finally, Bill Gates and Warren Buffett have teamed up to
build an advanced nuclear plant in Wyoming.
Now I’m not a big fan of either of these guys. Bill is great at taking other people’s ideas
and turning them into money for himself and Warren knows how to manipulate the
masses into fattening his pocketbook.
When I saw that they had paired up to build a new reactor, I knew that
this uranium thing could have legs.
Also, Larry Fink of Blackrock has virtue signaled on multiple occasions
that he is no fan of the petroleum industry.
This man is the CEO of the largest money-management firm in the world. Blackrock manages over $8.6 trillion
in assets under management. When he
announces publicly that he is embracing the ESG (environmental, social, and
corporate governance) mantras, you better listen up. None of these guys are in the business of
wasting or losing money. That’s why I’m
confident that a big bull run in uranium is coming.
So how do you play this?
There’s two ways; the first is direct ownership of the commodity through
a futures contract (ticker UX) or (for us plebs) a PLC stock with ticker YLLXF. The second way to get into the game is by
owning the miners. There are 49
companies that claim to be in the business of mining uranium. Now I’ve cut this list down to seven that I
think are the most promising. In order
of greatest financial strength to weakest; NexGen Energy (NXE), Denison Mines
(DNN), Energy Fuels (UUUU), Uranium Energy (UEC), Cameco Corp. (CCJ), and
Ur-Energy (URG). If you are overwhelmed
by the idea of choosing miners, there is also a uranium miner ETF under the
ticker URA that holds a variety. I am
personally holding UUUU, UEC, CCJ, & DNN.
Finally, if you look at the charts of these companies and
think you’ve missed the boat on the uranium story, I will share with you a
quote that I reflect on from time to time.
“I will tell you my secret if you wish. It is this: I never buy at the bottom and I always sell too soon.”
-Baron Rothchild
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