We hear a lot about Dr. Kent Moors here at Stuck Gumshoe — he has been one of the more heavily promoted “experts” in the energy space, with several newsletters based on his ideas being churned out by Money Map Press over the last few years, and several of those heavily promoted ideas have flamed out pretty badly — though I should be fair and note that for much of the time Money Map has been promoting him it has been a pretty weak period for investing in energy stocks.
His last few pieces were mostly about solar energy, including the big push he made late last Fall for SunEdison that was quietly revamped into a pitch for a different solar company after his original recommendation started to really sink into bankruptcy… but over the past week or two Money Map has started to recirculate his nuclear energy pitch that first popped onto Stock Gumshoe’s radar in May of 2014.
And I was perfectly content to ignore it this time around, frankly, since I wrote plenty about the ad back then — and was at least somewhat persuaded by the logic of the argument, though the expected catalyst of a rising uranium price never appeared and the companies never had that boom and experienced 100,000% returns. I figured it was just a rerun.
But, as our reader (and quick puzzle solver) modernrock has noted a couple times in answering this teaser pitch for other readers in recent days (you guys are often faster than I am, good job!), it looks like Moors’ publisher is using the same technique that worked so well for themwith solar stocks over the past few months: using a “tried and true” ad but changing the specific teaser hints to focus on a different company.
So I’ll take a look. If past promotions for Moors’ newsletters are any indication, we’re going to be asked about this one a lot, and if it’s a small stock the price might well go wonky — so let’s see if we can confirm modernrock’s answer and see if there’s anything else to the ad.
If you want to take a trip down memory lane and see my piece about this ad that was written in 2014 and updated last year, that piece is here. And the chart for the three investments he hinted at in that ad is here (the green line is one of the not-terribly-accurate price gauges for uranium, which you can see hasn’t really gone parabolic as so many folks expected):
So what’s Moors saying this time?
Pretty much the same thing he said last time — that there’s a developing supply gap in uranium that could create “total chaos” because 16% of the world’s electricity comes from nuclear power, and that “this exact same gap happened twice before in the history of energy” and drove “a handful of companies” up by 1,000% or more.
Heres a little taste of the ad, in his words:
“Already, Saudi Arabia, the country with more oil and energy than anyone on the planet, is investing $80 billion in this one type of electricity.
“In fact, nearly every nation on the planet – including the United States, India, Brazil, and Russia – is rushing to expand its use of this type of electricity.
“China is so worried, they’re planning on boosting their use of this electricity 26-fold… an incredible 2,566%.
“Like I said, this exact same situation has happened twice before in the history of energy. And… it’s happening right now.”
Some of the details in the ad have changed over the years, but you have to read them side by side to really notice — his big argument is that more nuclear plants are coming online but that uranium prices, depressed by the shutdown of German and Japanese nuclear plants after Fukushima, have remained so low that the miners won’t increase production. That will create a supply crunch that will drive prices higher, and make the mining stocks spike higher — as they did the last couple of times that uranium prices rose sharply (and, indeed, when any commodity gets so cheap that production is shut in — low prices are pretty reliably the cure for low prices when it comes to commodities, though sometimes it takes a long time for the cure to set in).
But the underlying numbers in the ad have changed a bit — back in 2014 he noted that demand exceeded supply by 40 million pounds, and the number he now cites is 20 million pounds… and stockpiles in 2014 were disappearing at the rate of 465,000 pounds per day, whereas now they’re disappearing at the rate of 395,000 pounds per day. And now he says those stockpiles “might only last six months,” which is more specific than he got last time. The price of uranium has continued to generally be flat or drift down most of the time over those past two years.
The uranium business is pretty opaque, and we often get tricked into thinking we understand it because we know about the publicly traded miners and how they’re doing… but mining, processing and selling uranium is a highly regulated and very strategic business, and it’s nowhere near being an open market. The uranium spot price is something we can watch for indications of whether short-term demand is going higher or lower, I guess, but it’s not really a free-trading commodity — most uranium is sold on long term contracts, most consumers have substantial stockpiles, and nuclear plants are not price-sensitive to uranium (fuel is a small portion of their operating costs).
So what really matters is how many nuclear power plants there are, and whether stockpiles are depleted enough that plant operators and governments will want to start buying up a lot more uranium from the mines, driving prices high enough to inspire more mine expansion or new projects and the acquisition of little uranium miners by the big operators. Dr. Moors, with all his talk of being an “insider” who meets with world energy leaders, would seem like someone who might understand it better than I do, despite the fact that his prediction hasn’t quite worked out over the past couple years.
It’s not just Moors, of course — I was pretty convinced of the logic of a uranium bull market two years ago, and uranium continued to essentially do nothing… so now I confess to having no idea when or how things might turn. Japan is gradually restarting its reactors, though it will take a long time, many of them will not be restarted if there are any seismic or safety concerns, and they must have abundant stockpiles after having so many reactors closed down for so long… and China, South Korea, India and other countries look like they’re going to continue to build new plants more quickly than the first-generation plants in the US and Europe are decommissioned, which should increase demand.
So if this really does finally bump prices up, what does one buy?
Like Moors did last time, he first mentions Cameco (CCJ) as the “uranium blue chip.” That’s been the easiest proxy for uranium in the stock market over the last 20 years, based primarily on the value of their huge and incredibly high-grade mines in Canada. Here’s what he says about Cameco:
“It comes down to this… if you’re looking for a world-class ‘blue chip’ that offers good upside, Cameco is a good bet. Again, the stock is trading at $11, and based on their uranium assets, as well as their well-diversified business model, I see the stock hitting $20 in the coming year.”
Which is really just an update of what he said back in November of 2014 (I can’t find my copy of his May 2014 version of the ad), which was this:
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“It comes down to this… if you’re looking for a world-class ‘blue chip’ that offers good upside, Cameco is a good bet. Again, the stock is trading at $16.50, and based on their uranium assets, as well as their well-diversified business model, I see the stock hitting $38 in the coming year.”
So take those projections with a big ol’ grain of salt — as always with a commodity stock, the company’s share price is moved both by the price in the commodity and, usually to a lesser extent, the operating performance of the producer… and if you’re wrong about the commodity price, as Moors and many other folks (myself included) have been over the past couple years, and as most of us are going to be when we try to predict the short-term price movement of any commodity, particularly one that isn’t even freely traded, it can get ugly. So be careful… logic doesn’t always win, particularly when you don’t know as much about a particular market as you think you do.
But then, of course, we get to the “secret” picks recommended by Moors — what hints does he provide?
“In fact, if 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 2016… this will be the company they point to and say, ‘My God, I wish I’d gotten in.’ ….
“J.P. Morgan, Morgan Stanley, and Goldman Sachs have all taken massive positions in advance of a uranium price surge…
“Currently, their stock is at 50 cents a share. But it won’t stay that way for long…
“… this company wasn’t even publically traded on the New York Stock Exchange during the last uranium boom….”
That’s roughly the same thing he said about UEC in the first version of this ad, though that was a “$1 stock” instead of a “50 cent” stock. UEC was trading on the Amex back in 2007, and it started trading right in the heat of the first uranium spike that year, so I suppose it could perhaps still match on that clue (though it hasn’t seen 50 cents in a while — the lowest it got in the dip this year was about 68 cents).
And all the stocks have gone bonkers this week — UEC and most any other uranium junior you might guess at has soared in the past few days. UEC is up something like 50% (which gets it back to close to where the shares were when Moors started touting it in 2014)… these shares seem to be anticipating a bull market in uranium that hasn’t yet shown itself in the price of the actual commodity (both long-term and spot prices are still scraping along at new post-Fukushima lows, according to Cameco — and Cameco has been surprised enough at how long it’s taking for a price recovery that they had to announce layoffs and mine closures earlier this year).
I don’t know where that optimism for future uranium prices is coming from, whether it’s the hype from newsletter ads like Moors’ or actual analyst optimism or some news that I just haven’t seen or just a new certainty to the same basic logic that has seemed fairly clear for two years now about prices needing to rise… but it’s worrisome to see the junior stocks go crazy when the commodity isn’t moving, particularly in an industry like this where there’s not much potential for an overnight surge in ordering that I’m aware of.
You and I can’t stockpile uranium in our basements like we can gold coins or collectible cars, retail investors inspired by enthusiastic stories of 100,000% returns might drive the price of uranium stocks (or the price of gold coins) when they get the speculative fever, but they don’t drive the price of uranium. The folks who drive the price of uranium are buying it on ten-year contracts, and they’re generally paying something in the $40-50 range most of the time these days (at the lower end of that range, mostly, but I’m trying to give some latitude for optimism).
But anyway, what is this stock?
“… this company is headquartered right here in the United States… and owns 14 uranium mines, all located in the U.S….
“the U.S. is facing a huge shortfall in uranium supply. As I mentioned, the Megatons-to-Megawatts program ended as of December 2013.
“That’s 25 million pounds of uranium per year… GONE.
“The U.S. desperately needs a home grown, domestic source they can depend on.
“This company fits the bill. They give the U.S. a uranium source completely within their borders. In fact, they’ve already locked in 10 mid- and long-term contracts with U.S. utilities!”
The focus on long-term contracts and the 14 “uranium mines” clues both point not to Uranium Energy Corp. but, as our reader modernrock pointed out to a few other folks, straight at Ur-Energy (URG, URE in Toronto).
URG is similar to UEC in some ways — both are in-situ producers with relatively small operating assets and lots of potential “pipeline” assets that they’re not spending all that much money on just yet (at least partly because uranium prices are low). Neither is a hard-rock miner, they extract the uranium from sandstone in a way kind of similar to oil production — they flood the mine with some kind of liquid, flush that liquid through the uranium-rich permeable stone, and pump the liquid back out. I don’t know if it’s water or some sort of specialized fluid, but then they have a refinery-type plant that extracts the U308 from the liquid, they toss it in a barrel, and they sell it to their customers. (I’m sure it’s a bit more complicated than that, but that’s the basic idea).
Both UEC and URG have one processing plant and one operating “mine” right now, though UEC is apparently not producing and selling uranium from their Palanga mine — URG is producing and selling uranium on long-term contracts from their Lost Creek mine that provide them with a base level of revenue for the next five years or so, and that is enough to make then nearly profitable with what they describe as cash costs that look like they’re right around $25/pound for the finished product. Increased prices would presumably free them up to sell more at spot prices (they have a decent inventory as of the last quarter, presumably because they’re not eager to sell more than they have to below $30).
That’s all just going by a quick look at Ur-Energy’s latest quarterly press release here, and UEC’s latest SEC filing here. I personally don’t have the stomach for making a big bet that uranium prices will rapidly turn around and make these smaller explorer/producers soar, but it has happened for similar companies in past manias… and it has happened for a lot of these companies just in the last few days, so you never know. Personally, I’ll just reiterate that it worries me when junior mining companies spike up in price in the absence of any fundamental information about their sector — if there’s no rise in the price of uranium, it’s just a publicity or promotional or sentiment-change spike, and those can turn right back in the other direction very quickly.
And yes, if you know of any fundamental changes to the uranium market over the past week, please let me know. I’m sure I miss quite a lot. Ur-Energy noted in a press release response to the spike in their share price, which must have been caused by the attention from Moors unless there’s someone else out there also hyping up the stock, that there is no material news from their end that should have caused such an abrupt re-rating of the shares.
And the other two investments pitched by Kent Moors in this ad? Well, though it looks pretty likely that he has replaced UEC with URG in this latest ad as his favorite junior uranium stock, it appears to me that he left the other two investments the same. That’s the Global-X Uranium ETF (URA), which is an ETF of mostly uranium miners, and the Uranium Participation (U.TO, URPTF), which is basically a fund that just owns warehoused uranium.
So that’s what I’ve got — I can confirm that URG is the best match for Moors’ updated version of his “uranium is going to soar” ad, and is very likely the pick he’s touting these days… but I can also confirm that both it and UEC, his prior pick that he touted with nearly identical ads, are soaring for no fundamental reason I’m aware of. If I were to invest in the potential for a uranium spike again, which would be difficult for me to do because the logic seemed pretty much as clear two years ago as it does today that uranium prices should be on the rise and they’re not rising, then I’d probably play it safe and invest in either Cameco or the URA ETF to get exposure.
When Cameco is shutting down some of their mines because prices are too low, but junior miners are soaring because prices just have to rise, I have to feel like the “blue chip” Cameco probably has a better handle on the market than the little guys do. That means, if there’s something “real” to this surge in the price of uranium juniors like URG, well, I guess I’ll miss it this time around as I wait. There’s risk to that, of course — there probably really is a supply shortage coming at some point, unless Kazakhstan is really upping production, and there are apparently lots of US utilities who have 10-year supply contracts expiring over the next couple of years who would like to buy from an American producer if there is one available… that should help the prices rise. But after three years of “prices should rise” I think I need to wait until they actually do rise before I’ll believe it.
That’s just me, though, perhaps I’m too cynical after watching so many folks talk up uranium for the past three+ years since the Russians decided not to extend their warhead recycling program (megatons to megawatts) back in 2013… I’ll pass it over to you, dear readers: What do you think? Is there better reason for optimism in uranium this time around, or is the frenzy just being stoked by a few pundits and promoters? Let us know with a comment below.