Cameco Corporation

UNITY SOFTWARE INC

Sprott Uranium Miners ETF

**In brief**
Uranium demand is increasing, supply is decreasing, and the end buyer is almost indifferent to the price it pays. And the price is very wrong.


**The backdrop**
- Government-set goals for zero-carbon emissions is increasing demand for nuclear power world wide.
- Smaller and safer reactor technology is increasing nuclear acceptance.
- Uranium supply has been higher than normal for the last decade, but that is ending.

**Why has Uranium Supply been higher than normal for the last decade?**

Lots of reasons. Here's a breakdown by geography:

**Japan**
In 2011 an earthquake and a tsunami struck Fukushima, Japan, which caused equipment failure and three nuclear meltdowns. Following the accident, Japan shut down all its nuclear reactors. The world lost a big buyer of uranium and gained a seller.

**Europe**
The Fukushima disaster spurred a [global backlash](https://www.statista.com/statistics/238656/number-of-nuclear-reactors-shut-down-worldwide/) against nuclear power and curtailed demand for uranium. Countries began releasing plans to shut down their nuclear reactors— Spain by 2020, Germany by 2022, and Belgium by 2024.

**Russia**
Russia was dismantling it's nuclear arsenal, down-blending its highly-enriched uranium, and selling it to the US. This created further cheap supply of uranium and more downward pressure on price.

**Kazakhstan**
Kazakhstan was ramping up its uranium production. In the beginning of the century, Kazakhstan was responsible for less than 10% of the global uranium supply. Now it's around 40%. They use a mining method called in-situ leaching which dramatically reduces costs. The declining exchange rate on the Kazakh tenge, their currency, also helped exports a lot too.

**Underfeeding increases supply**
Underfeeding is when you feed less uranium into the centrifuge of the nuclear reactor. As demand decreased in the 2010s, nuclear plants faced a problem: A centrifuge is built to always be spinning, and stopping the big plates damages them. Instead of stopping production, it is better to feed less uranium and simply enrich it longer. The longer length of time increases the quality of the uranium, resulting in the same potential energy output. But at the same time this process requires less input uranium. That means that when the schedule isn't packed, an enricher can slow things down, use less uranium, but not decrease output. Using less uranium leaves extra left over, which can be sold on the open market. That reselling is extra supply and a further downward pressure on uranium's price.

**Why is Uranium supply going down now?**

- Japan is back online.
- Russia is done dismantling its arsenal.
- Kazakhstan is trying to sign longer-term contracts and is cutting supply to the spot-market.
- Instead of shutting down its reactors, Spain _extended_ operation to 2027 ([and some out to 2035](https://world-nuclear-news.org/Articles/Nuclear-could-help-Spain-reach-net-zero-goal-says#:~:text=Under%20Spain's%20current%20policy%2C%20operation,from%20renewable%20sources%20by%202050.&text=%22To%20start%2C%20Spain%20plans%20to,coal%20and%20nuclear%20power%20generation.%22))
- France was going to shut down 14 nuclear reactors in 2025, but they got extensions to 2035.
- Mexico, Russia, the US, and many others are extending the lives of their nuclear reactors. Reactors that should have had a life of 40 years are getting extensions to live to 60, 80, and there are discussions now to increase the life of a few reactors to up to 100 years.
- China, India, the Middle East, and South Korea are all building new reactors.
- The best uranium mine in the world (McArthur River) was [shut down in 2018 due to lack of demand](https://www.cameco.com/businesses/uranium-operations/suspended/mcarthur-river-key-lake).
- The second-biggest mine in the world, Cigar Lake, is also [offline because of COVID](https://world-nuclear-news.org/Articles/Cigar-Lake-to-enter-second-COVID-related-suspensio).

All of this adds demand (or restricts supply) that wasn't accounted for. And in the uranium market, new supply takes a long time to arrive.

**What changed? Why the reversal in sentiment towards Nuclear energy?**

New research suggests that particulates released from burning fossil fuels is much more deadly than previously thought. A new peer-reviewed study published in [_Environmental Research_](https://www.sciencedirect.com/science/article/abs/pii/S0013935121000487) puts the global death toll at more than twice that of previous estimates. According to the study, exposure to [fine particulate matter](https://www.nrdc.org/onearth/particulate-matters) from burning fossil fuels was responsible for about 8.7 million deaths globally in 2018. That’s roughly the same number of people living in New York City or London. Fossil fuel pollution allegedly kills more people each year than HIV, tuberculosis, and malaria combined.

Sentiment is shifting fast. Nature conservancy groups are now advocating in favor of uranium in order to move away from coal. One pound of uranium is capable of producing as much energy as [three million pounds of coal.](https://markets.businessinsider.com/commodities/uranium-price)

**How long does it take for new supply to arrive?**

The nuclear fuel cycle is long. It includes mining, conversion, enrichment, and fabrication. Each one of these processes happens in a different part of the world. For example, uranium mined in Australia might be converted in Canada, enriched in the UK, fabricated in Sweden, and enters a nuclear reactor in Brazil. It normally takes between 18 to 24 months for the cycle to be completed.

If a nuclear reactor has inventory today that should last until 2023, they're pretty much working with a just-in-time process. And you don't want to operate a $10 billion facility using the just-in-time process, so it is normal that they carry a lot of inventories in different stages of the cycle to last two years, and most likely more.

If you look at the level of inventories today, in some cases, it's less than two years. It's the [lowest it's been over the past 15, maybe 20 years.](https://azariascapital.com/wp-content/uploads/2020/07/Uranium-201-Inventory-transcript_final.pdf)

There will also be the issue of finding new uranium to mine. This takes way longer. You have to explore and find the uranium, permit and commission the mine, invest in infrastructure, raise capital, and hire people. It can take ten years, maybe more in the developed world, to bring a new mine online. And even then, only one in 50 projects successfully becomes a producing mine. This is a likely bottleneck over the course of the next decade.

**Why is the end buyer indifferent to the price of Uranium?**

Nuclear reactors are very expensive to build, but they are relatively cheap to run. The price of uranium is extremely low in comparison to the safety and maintenance costs incurred by a nuclear plant. Even a quadrupling of uranium price would hardly move the needle. Uranium prices do not affect nuclear utilities much— they are price insensitive. Their priorities are security of supply, diversity of supply, and time. Cost is not the major issue.

**So what should I invest in?**

I don't have specific investment advice, but I am personally looking into:

**Cameco Corp** ($CCJ) — The world's largest publicly traded uranium company, based in Saskatchewan, Canada. In 2015, it was the world's second largest uranium producer, accounting for 18% of world production. (Also, Cameco's [mentions on Wall Street Bets is heating up big time](https://www.reddit.com/r/wallstreetbets/comments/plv4gf/wsb_discussion_today/?utm_medium=android_app&utm_source=share)).

**Sprott Physical Uranium Trust** (Toronto Stock Exchange: $U.UN) — The world's largest physical uranium fund.

**North Shore Global Uranium Mining ETF** ($URNM) — Made up of a basket of companies that are involved in the mining, exploration, development and production of uranium.

**Can I get an idea of the upside?**

Price targets are subjective and unreliable. I don't have one, but to give an idea from those more experienced than I: professional uranium investor [Kevin Bambrough](https://twitter.com/BambroughKevin?s=20) thinks uranium could hit [$180/lb by the end of March 2022](https://twitter.com/BambroughKevin/status/1437134682404147201?s=20). (It's at $40/lb as of now, so about a 4.5x in six months).

Anyone else interested in the uranium trade? Got different ideas on how to invest in it? Would love to hear your ideas in the comments ↓
![](https://cdn.commonstock.com/47f49c9f8d59818253ca998e0aa284826c235922ebb87bf0b2c72a606e56ec26-1514x1027.png?w=704&fit=max)

Doug Helton

Jon Bond

I started buying uranium a year ago ($NXE @ $1.81). Worked out really well and I made the mistake to sell at $3.62.

I'm not sure if it's too late to jump back now because the prices went up. If I will do enter a position at some point, I'm between $NXE, $UUUU and $DNN

**Side note:** Germany has been buying energy from France (produced with uranium) for some time now since it started pursuing reliance solely on clean energy because it can't cover its needs (imports from Poland too; produced with coal).

Panos

Thanks for the breakdown Nathan, been meaning to look into Uranium after seeing lots of tweets about it recently. I’ve had pretty bad luck with commodities in the past, but will definitely keep an eye out 

Hedge Vision

Innnnnnteresting. I like this a lot, thanks for the write up Nathan 

Brad Thibeau

Great write-up/idea. Very bullish on uranium and agree that UX presents a very asymmetric investment opportunity over a multi-year period. Another key driver of the thesis as of late is the emergence of the Sprott Physical Uranium Trust which has become a meaningful incremental buyer in the market equal to 13%+ 21' production, while also leading to improved price discovery.

Since launching in mid August, this vehicle has purchased more than 6M lbs of physical uranium out of the spot market --> driven spot prices 30% higher in a matter of weeks (and uranium equities +50-65%). These large-scale purchases further amplify the existing large supply/demand imbalance  and should accelerate the time in which utilities come to the market and resign long-term contracts (which will be the next material catalyst)

Still in the early innings, should be an exciting ride. Have followed/invested in this space for years, so feel free to reach out any time.

[https://www.titan.com/research/2021/09/14/more-uranium-this-time-its-physical-URNM](https://www.titan.com/research/2021/09/14/more-uranium-this-time-its-physical-URNM)

T◎m

We are an asset management company focused on conviction investing in small businesses on the cusp of a fundamental recovery. Learn more about how we can assist

https://azariascapital.com/wp-content/uploads/2020/07/Uranium-201-Inventory-transcript_final.pdf

Asset Management Company Home | Azarias

Uranium Price: Get all information on the Price of Uranium including News, Charts and Realtime Quotes.


https://markets.businessinsider.com/commodities/uranium-price

Uranium PRICE Today | Uranium Spot Price Chart | Live Price of Uranium per Ounce | Markets Insider

$u.un has had a decent take off since the ATM started but everyone invested in the space should appreciate that it’s just the start.  The new players that are coming to the theme/trade are first focused on buying calls in miners and a basket of junior #uranium miners

https://twitter.com/BambroughKevin/status/1437134682404147201?s=20

Kevin Bambrough (@BambroughKevin) on X

Retired Investment Professional on the side of truth and fairness. Tweets are just my opinions and not advice or recommendations. Looking for 10x in 10yr stuff

In a review of Spain's energy policy, the International Energy Agency says the country should consider the usefulness of nuclear energy, including for non-electricity applications, for diversifying technical options to achieve long-term carbon neutrality by 2050. Under Spain's current policy, operation of its fleet of seven nuclear power reactors will be phased out by 2035. The country aims to generate all of its electricity from renewable sources by 2050.

https://world-nuclear-news.org/Articles/Nuclear-could-help-Spain-reach-net-zero-goal-says#:~:text=Under%20Spain's%20current%20policy%2C%20operation,from%20renewable%20sources%20by%202050.&text=%22To%20start%2C%20Spain%20plans%20to,coal%20and%20nuclear%20power%20generation.%22


	Nuclear could help Spain reach net-zero goal, says IEA : Nuclear Policies - World Nuclear News


Cameco is one of the world's largest publicly traded uranium companies.

https://www.cameco.com/businesses/uranium-operations/suspended/mcarthur-river-key-lake

McArthur River/Key Lake - Canada - Uranium Operations - Businesses - Cameco

https://www.nrdc.org/onearth/particulate-matters

Posted by u/pdwp90 - 219 votes and 66 comments

https://www.reddit.com/r/wallstreetbets/comments/plv4gf/wsb_discussion_today/?utm_medium=android_app&utm_source=share

r/wallstreetbets on Reddit: WSB discussion today

https://www.sciencedirect.com/science/article/abs/pii/S0013935121000487

How many nuclear power plants have been shut down? Each year, five power plants on average are added to the list of global nuclear power plant shutdowns.

https://www.statista.com/statistics/238656/number-of-nuclear-reactors-shut-down-worldwide/

Nuclear power plant shutdowns 2023 | Statista

A Uranium Thesis

New position in CCJ

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