Today we dig into a teaser pitch from Kent Moors for his Energy Inner Circle, which is one of his “high end” newsletters — currently being sold for $1,950/year with some possibility of a refund (they have terms, so you have to wait a year… but if he doesn’t get you a chance at a 5,000% gain in that year, they say they’ll authorize a refund).
I imagine that rule about waiting a year before you can request a refund cuts down on the requests, particularly since you’d be having your automatic renewal kick in right around then, but at least they’re not doing a blanket “no refunds” deal like so many of the larger publishers do with their high priced services.
But anyway, what’s the tease about? A natural resource that’s “about to vanish” and make us all rich. Here’s a little taste of the intro:
“20% of this critical natural resource is about to vanish.
“It creates 12,096x more energy than oil… produces 16,000x more electricity than coal…
And 20% of the world’s supply of this critical resource is about to vanish into thin air.
“Every major country will soon pay whatever it takes to get this stuff… otherwise, their economies will collapse.”
Can you guess what it is? Don’t worry, he eventually “reveals” that he’s talking about uranium… which we’ve seen teased in waves, every couple years.
“… two of the largest uranium miners in the world are taking 20% of the global supply off the market.
“This has unleashed a perfect-storm scenario that could be 2X bigger than what happened in 2006.
“Back then, prices exploded from $36 to $140 a pound.
“And for the tiny miners who had high-grade uranium ready to sell, their share prices shot to the moon.”
And he’s right, the supply is dropping by about 20%… though that’s not because supply is “vanishing,” that’s because the two biggest uranium miners in the world, Cameco and Kazatomprom, have cut their output by closing mines or otherwise slowing down production in a fairly desperate attempt to support uranium prices, which have been falling pretty steadily since the Fukushima disaster took Japan’s nuclear plant fleet offline in 2011.
So far it looks like that’s starting to work a little bit… but it’s very early days, and this exact same supply/demand imbalance and “too low” uranium price has been trumpeted by newsletters and other industry pundits for at least three or four years. Prices, we’ve been told, aren’t high enough to make uranium mining profitable in most places, or to incentivize future mine development that will be needed, and there are hundreds of nuclear power plants that require refueling and, more importantly, hundreds more being built that will require much larger amounts of the stuff to start operations.
Of course, we’ve also seen some declining demand in the US — the new nuclear power plant being built by Southern in Georgia is at least a billion dollars over budget and way behind on construction, and probably won’t inspire many new plants to be built… even as half a dozen reactors have been shut down in recent years because their old age and high costs made them uncompetitive, and more seem destined for shutdown soon given local unease with nuclear power or the cost of maintaining and upgrading 40-year-old facilities. Nuclear is doing better outside of the US, Germany and Japan, and remains a hugely critical power source for much of the developed world (and China and a few other places), but if there’s going to be meaningful growth in nuclear power generation it will have to be led by China.
Which is unfortunate, because nuclear power is probably our best hope as a planet to reduce pollution and greenhouse gas emissions without significantly reducing electricity consumption, but that seems to be the path we’re on. I do hope that the world agrees to push forward with much more use of cleaner, safer, new reactor designs, but I’m skeptical that it will happen.
And, frankly, I’m a little skeptical about uranium prices, too — not because I disagree with the basic premise that there will be new plants built and that uranium prices need to be higher to support the cost of exploration and extraction, but because I’ve agreed with that basic premise for four or five years, and uranium has not yet risen in price.
Partly that’s because of the surplus uranium that was no longer needed after Japan shut down most of its reactors (they’ve restarted some of them, but nowhere near all… and they had contracts to buy refueling uranium for all those reactors, so the “extra” uranium was just piling up), and after Germany suddenly shut down all of its reactors as well, but uranium doesn’t trade on commodity exchanges and is a hugely strategic mineral, too, so the supply and demand picture is not nearly as obvious as it first appears… even to experts like Moors, who was himself convinced in 2014 that we were on the verge of a major imbalance that would drive the price skyward.
The spot price and long-term price have just barely started to turn up now, which is probably a positive thing, but they have turned up before — particularly in 2014-2015 when the latest round of uranium bullish sentiment from the newsletter crowd really got “refueled” — and those price increases have not “stuck.”
So it’s fine to bet on uranium because you see that initial rise in the spot price and the first inkling of a rising long-term price (most power plants buy uranium on long-term contracts, which is why the long-term price really matters), but remind yourself that you’re speculating on something that has seemed likely for four or five years without really coming true… it might be that uranium has another price spike that makes speculators millions, you can see those past price spikes in 2007 and 2011 that are what every uranium speculator points to as the proof that a speculation can work, but it might not happen… or it might not happen on your timeframe.