This article is a repeat of a solution to a teaser pitch that Dr. Kent Moors has been marketing very aggressively for almost a year.
Why? Because he and his publishers at Money Map are pushing it very heavily again, as they’ve done every few months, and we’re getting questions… and there have been some developments in the market since the ad started circulating. Our original article was entitled, “The Electricity Crisis that Dr. Kent Moors says could bring 100,000% returns” … so if you already read that one back in May of 2014, you can skip along to the bottom to see the additional info I added six months ago in November (and, if you wish, throw your thoughts and comments into the discussion pile… the original discussion is all still there at the bottom as well).
What follows was published on May 14 and has not been edited or updated other than the November 2014 update at the end. The original comments and discussion are also appended. The stock he focused on most, UEC, has bounced from $1 to $1.80 and back a couple times as uranium prospects (and prices) have fluctuated. Uranium is up a bit again in the last few months, to about $40 now (the recent low is $30, the highs were big spikes to $70 in 2011 and $140 in 2007).
—-from 5/14/2014—-
Dr. Kent Moors is pitching the upcoming electricity crisis as a reason to invest in his newsletter and reap your riches from the panic — I imagine you’ve seen this ad, because readers have been peppering me with it since it started running yesterday.
The first couple pages of it are mostly about how horrific things get when electricity production is compromised, with the huge hit to the economy from closed power plants and/or brownouts or rolling blackouts when generation can’t keep up with demand. He has a graph he uses over and over again that shows a gap, at some undetermined point in the near future, where electricity demand will be 16% higher than generation capacity. Here’s a bit of the spiel:
“Bottom line: The cost of a 16% electricity void would result in the massive loss of human lives and trillions of dollars.
“And make no mistake, we are on the brink of a crisis… a 16% electricity void that could decimate the global economy…
“Of course, world leaders aren’t going to let that happen. And in the rush to solve the crisis… you have an extraordinary opportunity.”
Here’s some more of Dr. Moors whetting our appetite:
“…this has happened twice before in the history of energy.
“Both times, it created a slew of new millionaires.
“In fact, the last time this happened, folks who got in early and followed the right signs had a chance to turn $1,000 into $1 million. And that’s on just one trade…
“The evidence makes the case: This crisis is happening again for the third time. And while it’s not 100%, there’s no denying this opportunity could change your life.
“I’ve been tracking this situation for eight years waiting for the right moment to get in. And I can tell you without a doubt:
“The pendulum is starting to swing and the upside is going to be huge.”
OK, so… wanna get a 10,000% return? Me, too! How does he think we can do that?
Well, as you’d know if you had the patience to sit through the first interminable minutes of the presentation or read through a few pages of blather (don’t worry, there’s no shame in NOT reading that far — sifting the blather every day is the strange path we’ve taken, but most people aren’t goofy enough to do that), he’s teasing nuclear energy and uranium. Here’s a bit of that:
“World Leaders Agree: This Fuel is Vital
“As I mentioned, I advise 27 governments on energy matters. And I can tell you right now, every single one of them considers this fuel vital to the world’s energy mix.
“In other words, we can’t do without it. Period.
“That’s because this fuel can do what oil, natural gas, and coal can’t.
“Like I said, it’s 9,500 times more powerful than oil… and 100 times cheaper.
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just click here...“And get this: This fuel is 100% clean. In fact, it generates zero greenhouse gas emissions.
“In other words, unlike oil, natural gas or coal… it won’t kill the planet.
“As you probably guessed, I’m talking about uranium… the fuel that generates nuclear power.
“Now, I realize nuclear power is very controversial, especially after the accident in Japan in 2011.
“And maybe you’re in favor of nuclear power, and maybe you aren’t.
“But the fact remains, nuclear power is an essential part of the global energy mix, accounting for 16% of the world’s electricity.”
Not the first time we’ve heard the “uranium will boom again” argument, to be sure — uranium collapsed after the Fukushima disaster in Japan, which spurred both the shutdown of Japan’s large nuclear fleet and the global “rethink” on nuclear power, particularly in Western democracies that have the luxury of debate and hand-wringing, but it has also been widely predicted as a commodity likely to boom both because of Japan’s gradual re-start and the continuing development of new nuclear plants in China and India, and because of the drop in supply (at least to the US) caused by the end of the “megatons to megawatts” program that had us cooperating with Russia to recycle their unneeded plutonium into uranium fuel. The end of “megatons to megawatts” was actually on December 31 last year, so I’ve been expecting uranium prices to rise this year — and many investors (and newsletters) have been predicting sharp jumps.
You can check out his presentation here if you’d like to see his arguments about Japan and Germany desperately needing to reconsider their fear of nuclear energy, and about the many countries who rely on uranium for at least a quarter of their electricity (particularly those who would otherwise be completely dependent on natural gas from Putin’s Gazprom or on coal).
But yes, the basic pitch is, “uranium prices should surge” — here’s some more, in his words:
“Uranium Demand is Off the Charts
“Right now, there are 434 nuclear plants worldwide consuming about 180 million pounds of uranium per year.
“Annual supply is only about 140 million pounds per year.
“That’s a 40 million pound supply gap! And it’s only going to grow…
“Already, there are plans to add 553 more nuclear plants worldwide… 70 of which are already under construction or ready to come online.
“That’s more than DOUBLE… and it’s only the beginning….
“…during the last uranium boom, prices soared 13-fold… to hit $140 per pound.”
In many ways this is similar to other “something’s gotta give” pitches — uranium demand increasing, uranium is currently (at $35 a pound or so) changing hands for prices that are too low to spur any development of new mines or expansion of old ones. Moors says that stockpiles are being depleted (like megatons to megawatts), and that $70 is really the price producers need …
“The price must go up – to at least $70 per pound – or uranium supply will disappear.”
And, unlike with most industries, the consumers are not price-sensitive — nuclear power plants don’t shut down because of high fuel prices the way a coal or gas plant might, because the vast majority of the cost is in building and maintaining the plant, not in buying the fuel. Uranium prices have very little impact on the price they have to charge for electricity to make a profit — the interest rate on the massive capital investment required to build the plant, and the cost of safety and maintenance operations, are both larger issues than uranium prices. Here’s what Moors says that means:
“Once their supply is threatened, once they feel the pressure of disappearing stockpiles, the nuclear plants are going to panic and drive prices through the roof.
“And once the price starts to move higher, it will just keep on going…
“This is what happened in 1973 when the price of uranium soared 10-fold. It’s what happened in 2003 when the price of uranium soared 13-fold.
“And it’s what’s going to happen again, for the third time, very soon. The pendulum is starting to swing, and now’s the time to act.”
So what should you buy? Well, obviously he’s suggesting we buy some sort of uranium stock. Here’s how he describes the situation for uranium miners:
“… during the last uranium boom, these companies took huge amounts of investment capital from other investors… and sunk it into their uranium operations.
“And now they are literally sitting on hundreds of millions of dollars of investment in equipment, infrastructure, permits, and geologists.
“In other words, their ‘war chests’ are loaded to the brim!
“But here’s the thing… because of low uranium prices, this immense capital investment isn’t reflected in their share price.
“In other words, these are world-class companies… armed to the teeth… selling for pennies on the dollar….
“And while I can’t promise we’ll see a 100,000% rise like Paladin did last time… the upside potential is there.”
So yes, finally, we do get down to the actual tease — he has four uranium investments to share with you today if you’ll subscribe to his Energy Inner Circle (currently “on sale” for $1,995, roughly half of the “list” price). One of them he gives away for free (yes, it’s the super obvious one), and three are “secret” picks he will explain to his subscribers.
But he does let loose with some hints and clues, naturally, to get you intrigued and excited — so we can tell you what the stocks are if you happen to be one of those intrepid souls who prefers to do your own research.
The freebie is, as you would have guessed the first time I typed the word “uranium”, Cameco (CCJ). Cameco is, as Moors says, the “blue chip” company in uranium, the only really large pure play on uranium mining. He says that “if you’re looking for a world-class ‘blue chip’ that offers good upside, Cameco is a good bet.”
And it’s pretty hard to argue with that — it won’t go up 100,000% because it’s not dirt cheap, it’s already producing, and it’s not a pie-in-the-sky explorer that can leverage a big discovery. But if uranium goes to $70 or spikes even higher, they’ll sure make a lot more money than they do today. They’re reasonably priced at about 15X next year’s earnings, they have a long-lived mine (albeit one that has had some problems, particularly with flooding that delayed production for years — mining is almost never a “safe bet” kind of industry, particularly if you rely on one mine for most of your revenue), and they have a solid enough balance sheet that they can even comfortably pay a nice little dividend.
But it’s a $10 billion company, you’ve almost certainly heard of them, and you can go form an opinion on your own. How about the “secret” stocks he teases?
Here’s the first one, and the pitch is thick and gooey:
“If you’re looking for maximum upside… and you could only own one uranium company to position yourself for the coming boom… this would be the one.
“Years down the road, when people talk about the uranium boom of 2014… this is going to be the company they point to and say, ‘My God, I wish I’d gotten in.’
“You have a chance, right now, to do just that…
“And listen, you’ll be in very good company. In fact, some of the savviest minds in the world are taking a serious stake in this company.
“For example, Li Ka-Shing – the richest man in Asia with a net worth of $33 billion – is loading up on this company.”
Some more details? We learn that Rick Rule, the noted resource investment banker, is also a shareholder, and that Spencer Abraham, former US Energy Secretary, is their Chairman. That pretty much gives us a definitive answer, but here’s a little more just to heighten the suspense:
“This company went public at the PEAK of the last uranium boom in 2007… issuing 89.5 million shares at the price of roughly $7.
“In other words, they raised about $625 million…
“What did they do with the money?
“Simple. They invested in their future… and prepared themselves for the next boom.
“They bought things like equipment, technology, infrastructure, permits, and mining rights… everything they needed to run a profitable operation.
“But here’s the thing… when uranium prices dropped, their stock price dropped to where it sits today – at about $1 per share, giving them a market cap of about $100 million”
It’s a funny kind of argument, that this company has already blown through half a billion dollars in seven years and therefore has become a great buy now — but there is some logic to it if their investments have really added value (reserves, equipment, production capacity) to their asset. So who is it? This is Uranium Energy Corp (UEC).
UEC has been a hotly debated stock over the last decade or so, going up and down on both promotional chatter (and short sellers who derided its stock promoter roots, like this Citron piece from 2010) and on the prospects for uranium. They didn’t actually raise $600+ million in their IPO, but the IPO was for about half that much on the AMEX back in 2007, and I’m sure they’ve raised more money since. They have some uranium production now, but it’s very small scale — their biggest project is the Goliad in-situ recovery project in Texas, and they also have a few neighboring projects that they think they can advance as “hub and spoke” additions near the core processing plant when it comes online.
The development of Goliad has taken many years, it’s at least a few years behind the original schedule — but I guess that’s no surprise, given weak uranium prices. They are explicitly soft-pedaling now, they say, to make sure they don’t ramp up production until prices recover. Production is on track to start this year, they say, but they are expecting uranium prices to recover this year to make it viable. And they are essentially stockpiling potential projects, with about 25 projects on their list, almost all of which are at the “exploration” stage and not currently the focus of investment — all but a couple of them are in the US, mostly in historically producing uranium areas in Wyoming, Colorado and the Southwest.
Will uranium prices really leap higher this year? Well, so far the answer is a resounding “not yet” — they’ve continued to fall, from the $40 that seemed too cheap a year ago to the $35 that seemed like a “breaking point” at the beginning of 2014, to now (depending on who you ask — there’s not really a “spot market” for uranium) dipping below $30. UEC’s cash costs for their existing production are in the $20-25 neighborhood, I presume that Goliad is cheaper but I don’t know — these are very low-grade deposits, but it’s also an in-situ recovery and refining process that I don’t really understand. This is very different from the massive high-grade uranium deposits in the Athabasca region of Canada, which are unique in having big, 10%+ uranium grades (like at Cameco’s Saskatchewan mines), but lower-grade deposits using in situ recovery are not unique to UEC — Cameco also uses in situ recovery at their US mines and in Kazakhstan, and presumably other global producers do as well, and many of them are apparently profitable to operate (if not build) with uranium at $30 a pound, so the high grades at the unusual Saskatchewan mines don’t necessarily mean that low grade mines can’t be developed or compete (and Cameco’s mines have been both geological and technical challenges in many ways, so high grade isn’t everything).
There are many factors impacting uranium pricing, including production and demand but also the drawdown of stockpiles around the world, uncertainty of new plant demand, the closing of old plants for performance reasons (old age) or political reasons, etc. There’s an interesting quick interview here about the current state of the market and the viability of the oft-rumored “Uranium Renaissance” if you want to get your head around it — interestingly, one thing that jumped out from that note for me was the analyst’s forecast that higher prices wouldn’t really come until 2016.
Which means … I don’t really know whether UEC will leap higher this year. It has continued to fall as uranium prices have fallen (except for this week, when Moors’ attention is doubtless sending the price higher — it doesn’t take much to make a $100 million stock all jiggly), and as they have failed to say anything particularly aggressive about boosting production immediately. Bulls and bears have debated the stock loudly at Seeking Alpha and elsewhere, and it’s a tiny little stock that bounces around like crazy on this attention, so beware — but I can certainly see it being among the more highly-levered names to the price of uranium if we do indeed get a huge spike in prices.
For full disclosure, I have some very speculative (and so far money-losing) options positions in both CCJ and UEC, my own little bet from a few months back that uranium chatter (and prices) would rise this year and the stocks might surge. Hasn’t happened so far.
UEC was clearly the stock that most excited Moors in this pitch, he closes with some speculation about the possible economics of their operations:
“At $70 per pound, this company has the capacity to produce five million pounds per year… five times their current production.
“And while they’re currently making about 50 cents per pound with uranium prices at $35… when prices go to the necessary $70… they’re all of a sudden making $35 per pound.
“And again, they have the capacity to produce five million pounds.
“So instead of making 50 cents per pound on one million pounds… they’d be making $35 per pound on five million pounds.
When uranium prices rise, their gross profits could explode from $584,000 to about $175 million… a staggering 300-fold increase.”
And Myron Martin, who writes a mining column for us, has also been a big UEC fan, calling it his favorite uranium stock back in December (he also had a followup on some other uranium juniors here, by the way).
But UEC wasn’t the only stock teased for Dr. Moors’ Energy Inner Circle — we’ve got two more.
I know, I’m getting a little tired of writing this one… and I’m sure by now you’re tired of reading it. But we’ve come this far. What are the other two investments?
Here’s the first one:
“One investment opportunity I’ve uncovered allows you to tap into the entire market… and profit from both rising uranium prices and the rapidly expanding nuclear power industry.
“The exciting thing is, this investment gives you boots on the ground in the biggest uranium-producing countries in the world, including Canada, Australia, Kazakhstan, Niger, and Russia.
“Plus, it gives you an interest in some of the most lucrative mining operations on the planet.
“For example, this investment gives you access to Canada’s MacArthur River Project, the largest uranium mine in the world.
“By the way, the ore grades at this mine are over 100 times the global average, making this project insanely lucrative.
“In addition, this investment gives you access to an exciting new uranium discovery in the world’s most important uranium district: Saskatchewan’s Athabasca Basin.
“This discovery was so unexpected – and so potentially lucrative because of its high-grade ore deposits – that it created a ‘staking frenzy’ as mining companies rushed to claim adjacent properties.
“When you add it all up, this investment allows you to tap into $80 billion of proven uranium reserves… all for just $17.
“As uranium prices rise – and remember, they need to double to keep the lights on – the value of these assets could double, triple, or more… sending this investment soaring.
“And uranium is only the tip of the iceberg for this investment. In fact, this investment gives you access to every aspect of the nuclear power industry.”
Well, Thinkolator sez this one is not a stock, it’s an ETF — the Global X Uranium ETF (URA)
Which does have exposure to most of the huge uranium mines and producers in the world, including nearly a quarter of its portfolio in Cameco and 10% in Denison Mines (DNN), and it also invests substantial chunks in Paladin, Uranerz and other producers… and owns little bites of a bunch of smaller junior names.
But it ain’t at $17 anymore, you can now pick up shares for a bit under $15 if you’re interested. URA has been the ugly stepchild of the nuclear ETF space, with several horrible years compared to the rather flat-to-decent performance of NLR and NUCL, the two broader “nuclear energy” ETFs, but that’s because URA is just uranium companies and NLR and NUCL are really utility ETFs that mostly own nuclear power companies (which are almost all broad-based utilities, like Duke Power and Exelon, who have nuclear plants as part of their portfolio). NLR and NUCL will probably be impacted (very gradually) by the popularity of nuclear power, but they move mostly with the broader utility sector and aren’t driven by the price of uranium — URA is.
And we’re still not done! One more uranium name pitched to us by Dr. Moors:
“The opportunity I’m going to show you now is a pure price play… and allows you to profit from uranium’s imminent rise with very minimal risk.
“We’ve already established that uranium prices must rise. Right now, they’re at $35 per pound.
“But unless prices are at $70 per pound, miners are not going to produce. Stockpiles are vanishing at 465,000 pounds per day… and unless prices rise, the lights are going out….
“the investment I’m tracking today is a new way to play uranium. It’s the brainchild of resource billionaire Eric Sprott, and it wasn’t even available during the last uranium boom.
“This investment allows you to own pure uranium… and profit from the price rise… without actually having to take possession of the uranium yourself.
“In fact, this investment allows you to participate in the coming uranium price rise… without the typical exploration, development or mining risks associated with owning stocks… they have fully licensed warehouses throughout the U.S., Canada, and France chock-full of pure uranium. About 10 million pounds worth….
“Goldman Sachs is sitting on 5,500 tons of pure uranium… and now you can too.”
So who is this? Uranium Participation Corp (U in Toronto, URPTF on the pink sheets). Which was indeed inspired by Eric Sprott, and which is essentially trying to be a “physical ETF” for uranium — they buy it (under the auspices of Denison Mines, which is their regulatory partner but doesn’t control the company) and warehouse it, with the hope of selling it in the future at higher prices.
And one hesitates to sound like a broken record when saying “hasn’t worked yet” … Uranium Participation has been around since the mid-2000s, it was started just in time to participate in the 2007 uranium “bubble”, but since that 2007 spike it’s been mostly downhill (save the brief jump up for uranium pricing in early 2011 just before the Fukushima disaster). They stockpile both U308, which is the main uranium fuel we think of, and Uranium Hexafluoride (UF6), which is used in uranium enrichment. I haven’t looked closely at what it costs them to warehouse this stuff, or how much trading in and out of it they might do at any given time, but they’re fairly passive and should generally be priced based on the current net asset value (NAV) of their warehoused uranium and on your expectations for where those uranium prices are headed.
Currently, U.TO is priced at about a 10% premium to their April 30 NAV — and that NAV was based on uranium a dollar or two higher than most folks report the price now. It’s a fairly simple proposition on this one — if uranium doubles, the NAV should double and the stock price might jump slightly more if folks bid it up to trade at a bigger premium. If uranium falls, the NAV should fall by about the same percentage and the stock may fall a bit lower if investor disgust with uranium causes it to trade at a discount to NAV. That means the possible pricing moves are far, far smaller for U.TO than they are for a miner, even a huge miner like Cameco, because miners should provide a levered response to the price of the underlying commodity (to simplify: if uranium doubles, the costs to produce it don’t necessarily double so profit should go up much faster than the commodity price, which would drive the stock price of producers higher… all else being equal, which it never is).
So there you have it — the consensus grows for a “uranium must go up in price” assessment, but even though the logic is sound the pricing has not, so far, responded to the logic… and the logic can’t tell us where and how large existing stockpiles of uranium are, or how quickly they enter the marketplace, or where political sentiment will go in major nuclear countries like France or Japan, or in waffling countries like the US and Germany, or in emerging and growing nuclear power producers like China and India. I do think we’ll likely see higher prices, and I thought we’d see them this year — but I could easily be wrong or early… and we should always be at least a little skeptical during times like this, when it seems like ALL the newsletter jockeys are 100% certain that uranium prices are on the verge of doubling.
It’s your money, though, so what do you think? Will the Japanese reactor restart get uranium prices rising? (They presumably have large stockpiles from their two years of shutdown too, don’t forget) Will nuclear power recover and grow as projected? Are we going to see a surge in uranium prices that drives the miners higher? Let us know with a comment below.
——11/5/14 update—–
This pitch, the current version of which you can see here, is essentially the same one Dr. Moors used early in the year, and you can’t be blamed for wondering when the uranium price might recover or what Moors meant by a price spike being “imminent” or “in the coming months.”
Just this week there has been a brief spurt of optimism, with spot prices coming back up to the $35 level they were at when Moors first teased this back in the Spring (they since fell down below $30 before bouncing back up again). Spot prices don’t mean a lot, though, since most producers sell on long-term deals… but they are a potential indicator. And UEC is still essentially sitting on its hands waiting for better prices.
As far as the actual prices and when pricing might rise sustainably again for uranium, Moors says this:
“With uranium demand exceeding supply by 40 million pounds, the only thing keeping the lights on is existing stockpiles…
“And those are disappearing at the rate of 465,000 pounds per day.
“At best, they’ll last six months.”
But that’s not necessarily the complete picture. In a recent interview that I found interesting, a uranium stock analyst (Colin Healey from Haywood Securities) noted that although the energy companies are gradually becoming more dependent on primary producers than on stockpiles for supply, the market has been in oversupply for so long that it’s a gradual process.
And importantly, Healey notes the much larger impact that new reactors (being fueled for the first time) have on the uranium market than do existing reactors that need regular partial refueling, so those 70 “planned and under construction” reactors expected to come online in the next few years are an important driver — restarting reactors in Japan is expected to help change sentiment next year, but not demand, since Japan is believed to have large stockpiles of uranium fuel. His firm, for whatever it’s worth, has a target price of $39.50 for uranium next year and $56 in 2016 and $75 “long term” … so it may be that we have to get to that “long term”, or at least an expectation of it among industry players, before there’s a lot more restarting of mines.
The full interview is here if you want to see it, I don’t (of course) know if he’s going to end up being right with his forecasts, but it’s a well-explained position — and his firm currently has “hold” ratings on Uranium Energy and Paladin Energy (PDN in Toronto, PALAY on the pink sheets) and “buy” ratings on Uranerz (URZ) and Ur-Energy (URE, URG in Toronto) and Denison Mines (DNN, DML in Toronto). I don’t know most of those intimately, though Paladin seems the riskiest because of their balance sheet issues (lots of debt due next year) — I mostly shared this interview info because I found that analyst’s nuanced position to be more compelling than Dr. Moors’ certainty.
I’ve kept the old comments on this article from May, so you can see those below — and if you’ve anything to add, or a perspective on uranium or any of these miners, or a likely trend for global nuclear power, well, I hope you’ll add your thoughts to the discussion. Thanks!
regarding Areva, the French company in all aspects of nuclear power somebody asked about. It has an unsponsored ADR as ARVCF. It is a political football in France because the job goes to a supporter of the most recently elected Prime Minister. It also is a national treasure. So excusez-moi, Spencer Abrahams, ex-US energy secy, is NOT chairman of the board, or President du Conseil d’administration.
You cannot get a top job in a state-owned company if you are not Francais or at least Europeen. This would be a violation of all the back-scratching rules of the Ecole Nationale d’Administration. ENArchs are where French politicians find people to run nationalized companies. Pas d’americains! Jamais les yanquis!
The politics are so awful that I stopped owning les actions d’Areva. Now I confine my nuclear nuttiness to Canadian companies, not including UES. Les societes canadiennes, mes amis. Uranium miners are my thing.
Cameco is one and thanks to this site, Uranerz, is another. URZ just got a bit further into the process of getting its latest mine approved by the state of Wyoming. It has the lovely name of Jane Dough, good for at least a pop of 0.0001% right there. It also is working on getting US NRC approval of another project called Nichols Ranch which is open. I wish Nichols Ranch would change its name to Nickel Ranch to show that there is money in that idea too.
Cameco after years of horror finally last month brought back on the Cigar Lake mine after a horrible flood which it took years to dry out. Both companies and everyone else are waiting for more orders for uranium fuel to tip up the price, which is slow going. It is kind of like a batch of uranium. The half-life is hundreds of years. But meanwhile they are piling up the nuclear fuel for when demand picks up again after everyone has forgotten Fukushima.
Sayonara and au revoir
Vivian check out Energy Fuels (Myron has mentioned it as one of his top 3 holdings). I have been following and gradually increasing my positions in U stocks for three years. I expect this to be a raging bull market across the next 3-4 years and UUUU actually has better scale-up potential from ready mines than UEC, URG or URZ. Dennison and Energy Fuels are the two best holdings. I would not go GA-GA about the Athabasca basin just because it’s got the highest grades. Most of the Athabasca players are micro-caps set to rise on exploration results. The most conservative and yet also appreciation-aggressive plays are the small and mid-cap PRODUCERS, and in that group Energy Fuels absolutely stands out. I really like UEC also, and URG has an excellent production cost profile – but compared to the deep bench of turnkey mines and development projects Energy Fuels has, it’s a wonder to me that more people don’t understand it has larger potential. Energy Fuels seems almost invisible in investment discussions, yet it can ramp up production from 1 mlb. to 6 mlb. in about 9 months to a year, whenever spot prices warrant. I just found out today that Uranium One, which is one of the mid-caps and a very large player in Uranium, reported quarterly yellowcake production which annualizes to 6 mlb. a year. Yet here is Energy Fuels, a company which by capitalization is in the small cap group with URG, UEC and URZ, and it’s **turnkey** projects can ramp production in a single year, up to about what Uranium One is reporting. Probably Uranium One can ramp up even more when things really get going, but EFR.TO/UUUU is a huge sleeper stock. And I agree with you – the entire sector is a very short distance away from a massive bull market. This is a *picture postcard* juncture for people to climb into Uranium miner investments for the next 3-5 years. Huge bull markets begin with nearly complete public invisibility – and Uranium now 3 years past Fukushima, is absolutely ripe to kick off a major bull run. For people who start doing some sustained reading around and research, you can see quite clearly that the entire sector is heading straight into a severely mispriced launch pad for a new major bull run. 2020 is now just five years away. Just about every long time analyst/observer of this sector has noted that much higher U prices are inevitable by 2020. For mature investors who understand the value of holding investment theses patiently for really big payoffs, it does not get much better than this setup in November 2014. You look around at the deep skepticism of other prospective investors, their disbelief is a direct product of the past 3 years price action – these are people whose primary conviction to buy into a sector play, comes from peer agreement and recent price action. If they dont’ see the peers and spot prices agreeing with the thesis they will consider the thesis invalidated, and they will be the ones gnawing their fingernails about whether to buy in after Uranium stocks have already risen the initial 200%. They need their PEERS to be buying in order to gain confidence. Paradoxically, the safest 200% comes from the rock bottom prices, or anywhere within say 50% of rock bottom. That juncture in the Uranium equities is right now.
Thanks for the ‘teaser’ update I have been in and out a bit but no holding. Good for swing trades. cheers lulu
The thing we should all recognize is that when highly volatile sectors like Uranium shares stage an explosive rally and go up 100-300%, that’s only their initial rise (this is a very small rally for uranium stocks). And actually, it’s very difficult to buy into such explosive rallies. Almost impossible to market time purchases after very large initial rallies. So people who think it’s safer and that they will “buy in when the time comes” are actually looking at a maneuver that is very difficult to do. Buying in after an explosive initial rally is not only riskier, the harsh volatility also causes us to lay in only hesitant or modest starting positions. Bottom line – trying to market time U investments just doesn’t work very well. People think they’ve accomplished it by buying meagre starting positions after the first big rally, and scaling their position up to something more significant only after it’s risen a lot. This kind of investment in a sector like Uranium produces only modest payoffs, and actually dabbles with a lot of market timing risk. Most people just don’t accomplish it at all – the natural survival instinct to avoid “chasing” red-hot stocks sets in and our instincts tell us to pull back, or only invest a little. It’s actually much more powerful to gain conviction on an investment thesis and average down into the absolute bottom prices. But it’s a different way to invest – dependent on extensive research on the sector, and above all a clear mental conviction that the sector is severely mis-priced. That, and rock solid patience to wait for the eventual turn. This way of investing is not for everybody.
Some of his numbers seem to be quite overstated compared to other information on various sources. Many indicate that Uranium users were aware of the ex date on the warhead contract and began building up their supply which is still very large. Then the shut down in Japan, however, some stories state they continued to take delivery on some of their contract and many of their units will not pass the safety test to be restarted, The Russian warhead surplus still is in place and may find its way into the market on new terms and higher prices. The low price og NG and contined new discoveries will continue to place price press on Uranium in the future. IMHO we will not see $70 Uranium prices he states any time soon. Again many project higher prices are 2-3 years away, I am long UEC, but am not adding adding at this point.
KMI-http://www.bloomberg.com/news/2014-11-05/kinder-morgan-judge-refuses-to-block-44-billion-buyout.html
also
http://seekingalpha.com/article/2633125-kinder-morgan-on-the-cusp-of-a-major-breakout
Thanks Ben. Been looking for natgas investments…KMI has been on my mind.
“all else being equal, which it never is”
I’d put the rising dollar in that category. It could result in a feedback loop where problems in emerging markets with dollar-denominated debt cause a flight to the safety of the dollar. Something like that happened in the 1990s. It’s possible that sentiment and other factors could drive commodity prices lower than you would expect through the arithmetic of pricing in dollars.
I’m not making a prediction, only outlining a possibility to consider when managing risk.
There’s a bit of truth in nearly all sides presented here in the comments – terrific article, by the way! Thanks, Travis!
In my humble opinion, the only “sure thing” (in the U sector) is that uranium companies with leveraged exploration/development plays are in the best position to rocket upward. Even a modest (but sustainable) rise in the price of U would send these companies significantly upward. Right now, there are more than a few such companies at fire sale prices and they are not difficult to identify.
As for the big picture of U’s future… it’s here to stay for quite a while. Thorium is a terrific idea but it’s not a near-term viable solution on the scale needed to replace U. Believe me, if I’m still alive when it’s ready to take off, I’ll be a plank-owner in the thorium sector!
UEC was up 24.77% yesterday
up 1.4% @1.38 pre-market
Best-Ben
I have none
ONE WORD IS GLARINGLY ABSENT,Thorium, the new non radioactive nuclear fuel that is ignited by U-238 as a catalyst. See archived TED.com [stands for something like Technological Educational Discussions. Note, 207 tons is not a trivial amount, nor is the 14 million$ at 35$ lb. per plant world wide for U usage! What happens if the world sanely switches to Thorium, which U.S. has an abundance supply.
It might… but it might also take 25 years or more. Nuclear operators and regulators move veeeerrrryy slowly.
The highest UEC got in the last 5 years was $7.48 on 29 Nov 2010 and it had been downhill ever since. Its SMA50 is almost always above its SMA20 which shows inherent weakness in the stock price. It bottom out at 94 cents on 5 May 2014. If we narrow this to the last 30 days, the trading range is between $1.05 and $1.45…. Tickled by these numbers yet? Nah…..
Bought some CCO-T last week when all resource stocks were down.
Up 11-12% yesterday on Japan restart news.
Finally some good timing/value.
After following uranium miners for years from $38/lb to $120/lb – and all the way back again, getting burned by the CAMECO mine flood, Uranium One reorg, and suchlike, I simply hold a Nuclear Energy ETF (of miners, fuel processors and reactor builders), plus World Uranium Participation index which is pretty much the same thing. Very fed up with the misguided greenie sentiment against nuclear reactors, post-Fukushima panic, which has seriously held back new reactor construction – our lights will be going out soon here in a UK disfigured by hideous wind farms. Shame thorium reactors are still years away.
Hi Nick; Is that ETF that you reference, Global X Uranium ETF?
While I approach Dr. Moor’s letter and all other Agora sponsored publications with a wary eye, IMO Dr. Moors is absolutely correct on this call and he’s by no means the only one watching very closely for a major turn (high assurance event within the next 24 months) – something is well along in it’s basing process in the Uranium sector, which is becoming increasingly mispriced for it’s imminent future market – and this is a perfect contrarian setup for Uranium stocks to start rallying really hard in the next 3 years.
Uranium Energy Corp Reports a 77% Increase in Estimated Uranium Resource at Burke Hollow Project in South Texas
I took a position a few weeks ago in UEC and I’m watching it. Did anyone in fact turn $1,000 into $1,000,000.00? If so, where do I put the 1 grand?
did Moors run a used car lot ?
Put the money in the bank and make a run for the border. Then go to school about our future energy needs until you’ve absorbed the writing on the wall neither fossil fuel nor nuclear power are the answer.
Swing trade…
IMO a buy and hold trade.
Luke: I am swing trading the stock and holding long-term $ 1.00 call options.
Kent Moors may be a high powered energy consultant for sovereign states and big oil companies but his track record for investment advice is spotty at best. I got in early for UEC and it is up nicely but I will probably sell most soon and keep a small portion just in case it really does go to the moon. It seems to me that new recommendations ride up on a wave of new buyers – perhaps 15-30% then fall back to where they started. If you can get in early and ride this wave then get out in maybe 3 or 4 weeks, you might do well more often than not. Does this make sense? At any rate, I`m glad I just found this forum because this is a lot better than me trying to figure out which stock recommendation they are teasing us with this time.
Makes perfect sense, but this time the move is accompanied by strong upmoves in
CCJ and other resource stocks, which leads me to believe it may be for real this time.
No newsletter hype can cause such a wide move, although in the case of UEC you do have the periodic newsletter hype. But you also have a large short interest and the price of U308 going up.
UEC has had two wild runs up…..question is, ride it down with a short? Or wait and buy at another low. Haha, good traders can ride both ways ” it’s said”, me I more than often sitting and watching stocks get away on me, often when I hold and shud sell too.
Good luck with your trade. Thanks for the insight.
In point of fact, thorium powered nuclear reactor technology goes back before the arms race, back into the 1950’s, when the U.S. built a small such reactor at Shippingport, PA. It went online as a power reactor in 1957, and ran for 20 years, after which it was converted into a light water breeder reactor, and ran in that capacity until 1982.
Thorium is so minutely radioactive that it’s used as shielding for depleted uranium military armaments. It is the 4th most plentiful element on earth, and when used as a nuclear fuel, the reaction cannot run away as can a uranium-fueled reactor. This is because turning ordinary Th-232 into fissionable U-233 requires the bombardment with a neutron that must be continually provided, or the reaction stops.
When I initially researched this in 2011, there was uncertainty about how to dispose of the waste product of a thorium reactor, but the CS Monitor article referenced indicates that problem may be nearing a solution. Also in 2011, I saw a note that existing light-water uranium reactors are grossly over-engineered for a thorium reaction, and could be converted to the safer fuel at less cost than building a new reactor. There was at that time speculation that individual thorium reactors might be built as small as a home air-conditioning unit that would generate 1000 kw for private use over five years without servicing.
Still, there are political hurdles for any kind of new nuclear program, not the least of which is information. When I spoke to Senator Bill Nelson (D-FL), a member of the Senate Commerce, Science & Transportation Committee, he had not even heard of thorium. So much for the scientific prowess of the legislative branch.
Whether there is an investable opportunity here is unclear, but it merits watching. One bellwether might be when Germany decides to reverse its emotional decision to forgo nuclear power generation, taken after the Fukushima disaster. The now-higher cost of electricity in Germany might induce the Merkel government to become the first Western nation to construct – or retrofit – nuclear reactors that don’t make bombs, and can’t become bombs themselves. In that event, I would look not only at the uranium industry, but also at the minerals producers, such as FCX, RIO and BHP.
Bill — re your post 55–since thorium is the 4th most plentiful element on earth, and small reactors are possible, maybe we can have another Gummy startup and make a small reactor for houses. Only partly teasing – still, with some more science research and some engineering effort, it might be possible. And it seems like a reactor for large cities should be possible today.
My table of elements lists Thorium’s abundance in the Earth’s crust at 9.6 mg per kg. Far below many of the other elements but about the same as Boron. Wikipedia lists it as 4 times more abundant than U, not 4th most abundant. Not trying to chastise, just keeping the numbers straight.
I am investing in copper. It is at a 5 1/2 year low. It might fall a little farther yet but all the world needs copper so it won’t stay down forever. CUM.TO is a profitable copper miner on the TSX in Canada trading at about 1.20. Their stock price is at an eight year low but they are still making money even with the low copper prices.
What ever happened to the “Pebble bed reactor” system? It was supposedly cheaper and very much safer.
Great article as usual. Don’t own any of the U shares mentioned in the article, but bought Paladin (PDN) at $0-45on the way down, averaged in again at $0-35 and again at $0-30. Holding them for the long term as i believe U prices will go up again significantly over the next coupler of years and if PDN goes back to $3-$4- again i will be very happy.
Keep up the great work and helpful information that comes from fellow members.
Uranium clearly will rise in price from $35 to at least $70. Any long term threat to Uranium is decades away. However, in the short-term it can fall as well as rise.
We should all have SMALL positions as part of our core holdings.
Again, SMALL!
Your advice may be sound, but my conviction in uranium has led me to a pretty outsized position, bought mostly near what I hope is the bottom.
Long $CCJ $UEC
Hendrix – Energy Fuels a much more conservative bet for holding out to 2020. Esp. now they have merged with Uranerz. Shaping up to be the sector leader among the small caps, and in fact transitioning to a mid-cap now. UEC has been mired in some controversy this past week. But now is not a good time to sell UEC. Maybe on the next rise. In all prev. bull markets for U, Energy Fuels actually out ran all the rest, even though it is presently very well hedged against low U prices they can ramp up 4-6 mill. lbs new production just as soon as U prices pick up. Here’s a set of valuation comps from this April (Cantor Fitzgerald):
Enterprise value divided by resource pounds : URZ: $6.65, URG: 4.09, UEC: $2.78, PDN: $1.46, EFR: $0.75 (!!)
I recently stumbled across some interesting interviews about the uranium market in the Palisade Radio YouTube channel. Here is one with Russel Fryer http://bit.ly/r-fryer-palisade He is one of the rare fund-managers focused on the uranium market and he has some strong views about the athabasca play vs established US producers. Also, he introduced me to a new company, Western Uranium (WUC) who have a lock on some new ‘ablation’ method of milling which makes the underground-mined ore in the US effectively as rich (in terms of extraction costs) as much higher grade ISR (if I understand correctly). WUC also have a private placement in the works and I am tempted to try get in for the 5year warrants. They are run by the former CEO of EFR and they have bought one of the 4 existing licenses for a mill, which gives them a lot of power in the U market.
Of course, I would be very interested in opinions of other Gummies on this…
Kind rgds
Curious, what % of portfolio do you recommend as ‘SMALL’ holdings: 5%? 10%?
thx (someone looking to ‘bet on’ Uranium for future potential, but not sure how much to dive in with!)
STEVE: Not sure who you are addressing in looking for an answer but I am sure you could get a wide range of answers depending on what perspective people have. There are those who advocate BIG BETS on stocks they feel strongly about on the theory that if they are right they will get a significant return. I tend to take the opposite view of betting only small amounts on any single stock so losses will be minimum if I am wrong. I prefer small cheap stocks based on the well established metrics that it is far easier and more likely for a .25c stock to double than it is for a $25. stock to double, not that it dosen’t happen, its just that the more money you need to invest up front, the more you stand to lose if for some un-forseeable event the stockdeops to a point that breaches your risk level. If I had a million dollar portfolio I would probably make bigger bets and think differently, but to me, spreading the money around makes more sense because I am thinking long term and am a patient investor looking for steady growth and capital gains as opposed to immediate income. To use a horse racing analogy, if I went to the track with $100, I was willing to bet, I would be more likely to make 5 $2o. bets than $100. on the favourite, but that’s just me. How much to bet on a given sector depends on your personal interest, your knowledge of the sector, the degree of conviction you have and your risk tolerance. I don’t invest in things I don’t care about or believe in or have no expertise in on which to base a rational decision. There is no “one size fits all” answer like the establishment tries to sell investor on through mutual funds based on the faulty premise of diversification so that if one sector of the market goes down another will make up the slack such as arbitrary %’s in bonds, real estate, financials, technology, consumer goods, utilities and 10% in precious metals as INSURANCE against market declines. This theory is self serving in that they want you “locked in” so that no matter what the market does they still earn their fee’s and commissions whether you are making any money or not. For example, I have never bought a bond in my life, and probably never will because I do not trust the fractional reserve banking system, or believe in fostering debt instruments. Likewise I do not trust the pharmaceutical industry so have ZERO interest in bio techs. Though some people who are experts in these fields make scads of money, it is not something I am comfortable with, so extending that thinking it makes no sense to me that I should arbitrarily have X % in bonds when they are in a bear market, ditto real estate or any other volatile sector. On the other end of that spectrum, when in 2016 the best gains in the market have been silver, followed by gold, and lately zinc, copper and lithium, so WHY should I limit myself to an arbitrary 10%, I go where the action is and use targeted ETF’s and options to get the best returns on things I understand. The debt creating banking establishment HATES gold because it is the canary in the coal mine that warns of danger of their corrupt system breaking down, so they paint it as “super volatile” and as a “sop” assign an arbitrary 10% allocation to dampen the market, but some millionaires (quite a few actually) have dumped their bonds, mutual funds and stocks in general and put millions into precious metals because of the dangerous levels of derivatives major banks are holding that famous investor Warren Buffets has labelled, “financial weapons of mass destruction” a house of cards that is now 7 X larger than total bank equity, which could wipe them out like a row of dominoes, it is not a question of IF any longer, mathematically it has become a matter of WHEN it implodes, so millionaires who have 50% or more of their net worth in precious metals may well have the last laugh.
In summary then, whatever is right for you based on your portfolio size and risk tolerance can only be decided by you based on all the factors mentioned or others based on your own mindset, there is no magic number anybody can give
you.
With precious metal stocks in the basement lately (which as an accumulator, I love) – the sporadic jumps in uranium stocks like UEC, for swing trading, have worked out very well for me personally. I am not worried when it’s down for a while because strongly feel that uranium will be trending up over or within the next two years. When I ask myself “what could possibly go wrong?”, it’s a shorter list than applies to most other stocks I’ve looked at. It’s a list that bears watching though. Nothing is risk-free.
Hi Patricia,
Thinking like you on precious metals, uranium, and swing trading on UEC.
Not that we can’t be wrong.
Being as we are thinking somewhat similar thoughts, I thought I’d call your attention to a speculation (I’m long) Brazil Resources, symbol BRIZF. President founded UEC. Company has gold reserve property in South America but just acquired uranium rights to a big tract in the middle of a hot Canadian mining area surrounded by Cameco and a bunch of other biggies. A speculation, of course. I’m long.
Nuclear energy looks like it has an even stronger future in China (and India) than many already thought, the Chinese people are getting tired of breathing in killer substances. The documentary is worth watching in full:
http://www.marketwatch.com/story/solar-stocks-soar-32-as-chinese-documentary-goes-viral-2015-03-06
Hi Patricia,
As we both swing trade in UEC, I thought I’d mention to me that it looks to me like it is about to pop up over $1.50. Chart pattern has higher lows moving up towards the $ 1.50 resistance level.
Of course the demand may be from hustling newsletter teases rather than news or fundamentals….so I wouldn’t think to much of the move as a big trend indicator unless the rest of the sector goes up too.
Long CCJ, UEC, URZ
Thanks Hendrix, been trying to stay away from posting this week (it gets too time consuming) but have been reading all of yours. Thanks for your URG mention back when, I’ve made use of that. I follow Rick Rule and the Sprott groups on the resource sector and get their email notifications, here’s a current one on uranium if you haven’t seen it – the recovery may be delayed but is probably still inevitable which continues to make swing trading so appealing:
http://sprottglobal.com/thoughts/articles/rick-rule-the-recovery-i-saw-for-uranium-has-been-postponed/
Also had been wanting to give you this link, short interview with Brent Cook, he’s pretty blunt about how crappy most mining exploration companies are and what separates the good from the bad:
http://sprottglobal.com/thoughts/articles/brent-cook-you-want-to-identify-the-people-and-properties-that-can-last-through-this-bottoming-period/
Thanks for the link. I agree with Brent on the importance of the management.
I read an interview with Doug Casey where he stated good people were
extremely critical in this sector, and I took that advice to heart as a method for doing due diligence on the the juniors. I will only speculate on them when I am of the opinion that the leader of the company has a proven track record, is impeccably honest and regarded highly in the industry, and is working on a project with high potential.
Casey had an article where he named 10 individuals as a future “Hall of Fame” of the next generation of mining and exploration superstars. Researching these names, I discovered their current companies and made a few speculations after looking at their current companies and projects. While I have these positions, I find myself more able to withstand the ups and downs of the stock, because I know there is a first-rate capable person of high character and good track record doing his damnedest to make the thing work. People like that wouldn’t be working on a project with low potential.
To give you an example, in making a decision on a royalty company, I had read about Sandstorm Gold, both in Travis’ articles and other publications. I was further impressed on an perusal of their website. But what convinced me was the resume of Nolan Watson, and the interview and videos of him presented on the website. I encourage you to take a look.
If I think the price of gold and silver is going to go lower and stay lower, I will reconsider my position. But until then, I have peace of mind with the investment in Sandstorm, and small moves one way or the other don’t disturb me.
HN: Nice double on UEC since your March 2015 post. Well done !
$UEC Ahem…big pop last two days in UEC accompanied by bull move in CCJ.
Been hanging around for a almost a year on these positions, hope the move is for real.
Long $CCJ UEC