Chris’ note: As I showed you in yesterday dispatch, uranium prices are up about 70% over the past year. Uranium mining stocks have shot up more than 100%. And we’re still in the early stages of this rally.
That’s why today, you’ll hear from our commodities investing expert, Dave Forest. He’s been recommending uranium mining stocks to readers of our International Speculator advisory since 2018. And he sees many of the same conditions today that he saw at the start of the last bull run in uranium.
If you’re not familiar with this niche in the commodities market, pay close attention. As Dave reveals below, one small uranium company saw its shares go from a penny each to as high as $10 during the last bull market. That’s enough to turn a $1,000 investment into $1 million…
Chris Lowe: We’re talking about the opportunity in uranium miners today. And as luck would have it, you’re in Reno, Nevada, right now looking at a uranium mine.
Dave: Outside of my work at Legacy Research, I’m a geologist and natural resource hunter. I explore for and stake new deposits and sell them to other companies for them to develop into mines. I also raise financing for mining projects. I’m here in Nevada right now because there was a uranium mine here near a series of gold and silver projects.
The uranium price is up about 70% from a year ago. And there’ll be rising demand for uranium due to the transition away from energy sources that emit lots of carbon. It’s one of the big themes I track for my readers. So I flew down here from Vancouver, where I’m based, to check it out.
It’s a past-producing uranium mine. It almost went back into production in the last uranium bull market, between 2001 and 2010. I’m here to figure out if it could go back into production again.
Chris: For folks who aren’t familiar with the uranium market, let’s kick off with the big picture.
Dave: Uranium is the feedstock for nuclear reactors. It’s highly cyclical due to big fluctuations in supply and demand. And it can be highly profitable. The last uranium bull market was one of the biggest moneymaking opportunities I’ve seen in my 20 years in this business.
The first job I got after working as a geologist in the field was in 2005 with Casey Research founder Doug Casey. We launched Casey Energy Speculator. It was an investment advisory focused on oil and gas, renewable energy, and uranium.
It was great timing. Between 2005 and 2007, the price of a pound of uranium went from $30 to almost $140 – a nearly 366% increase.
And uranium mining companies such as Paladin Energy – which Doug invested in – soared from a penny a share to as high as $10 during the bull market. That’s enough to turn a $1,000 initial investment into $1 million. Even the worst companies saw their shares rocket 20x.
In the last few weeks, I’ve seen the same setup take shape.
Chris: What in particular are you seeing? Why does today remind you of the start of the last uranium bull market?
Dave: As I mentioned, uranium is cyclical. The uranium market is one of the most cyclical markets in the world. As the price of uranium drops, mines become unprofitable and shut down. This shrinks supply and triggers more production. Eventually, you get a surplus, and prices fall again. And the cycle starts over.
The catalyst for that last bull market was low uranium prices. At $30, producers were losing money on every pound they sold. Supply shut down as a result… and prices started to pop.
We’ve been in a uranium bear market since the meltdown of the Fukushima Daiichi Nuclear Plant in Japan. This sent the price of a pound of uranium back down to $30 around this time last year. That was, again, too low to support any uranium production. So we were primed for another pop in prices.
Over the past 12 months, several of the world’s largest uranium mines closed because prices were too low. When you’re investing in commodities, that’s always a good sign. If you’re investing when the world’s largest mines are shutting down, you’re on the cusp of a wave of new profits.
That’s just how supply and demand work. If supply goes down, and demand stays the same or rises, price must go up.
Chris: What else should our readers be aware of when it comes to the uranium market right now?
Dave: That this bull market is heating up… fast. A Canadian investment fund called Sprott Asset Management recently decided to put money into a vehicle to buy physical uranium. It’s hoovering up the metal along with intermediate products in the refining process and storing them in a warehouse.
The company is saying, “We’re going to own uranium because we think the price is going to go up. By having this inventory, we’ll benefit from the rising price. And investors can invest in the physical metal.”
In 2005, 2006, and 2007 – during the last bull run in uranium – one or two groups started buying physical uranium like Sprott is doing now. Then a bunch of others piled on. From there, the price went from about $20 a pound to about $140 at the peak, in a relatively short time.
So if we see more groups start to buy physical uranium, this could move very quickly.
It’s a very interesting opportunity if you believe, as I do, that demand will go up, too.
Chris: Let’s talk about that side of the equation, then. The popular perception is that nuclear energy is dangerous. Won’t that hurt demand for uranium?
Dave: You hear that all the time. But it’s important to remember we live in a time different from the one the Chernobyl disaster happened in. Just as important, we live in a different place, too. The reactors we’re building are not the same as the ones Soviet engineers worked on in the 1970s, when they built Chernobyl.
The scary nuclear accident people point to in the U.S. happened at Three Mile Island in Pennsylvania in 1979. There was a malfunction. But the containment systems in the plants worked the way they were supposed to. And we averted a disaster.
With a modern nuclear reactor, we’ve never had a major issue.
And we’re going to need nuclear if governments want to achieve the carbon-reduction goals they’ve set out. Wind and solar are great. They’re hitting their strides. But nuclear is on a different level in terms of the amount of power you can roll out from power plants.
Also, we now have these smaller, modular nuclear reactors. We can build them almost anywhere, and quickly. Bill Gates and others are funding projects like these around the U.S. They’re going to build the first one in Wyoming at an old coal plant.
With all that going on, the public’s view of nuclear energy is getting a lot better. If those modular reactors show they can work, that could be a sea change. We could see these reactors roll out across the U.S… maybe all over the world. That would improve public perception even more… and be great news for uranium demand.
Chris: At the Cut, we want to pass on ideas that are as actionable as possible. So how should folks reading this play the setup in the uranium market?
Dave: There are two main options. You can buy a fund that buys and stores physical uranium. Those will do well. But uranium mining stocks will do even better. That’s because, as the price of uranium soars, their operating costs remain the same. This turbocharges profits.
Some of the uranium stocks I cover for our International Speculator subscribers have almost doubled in the past few weeks. That’s largely due to the big move higher in the uranium price.
For investors looking for exposure to uranium, the world’s largest public uranium company is Cameco (CCJ). That’s a company we hold in the portfolio that we have done well on. We’re currently up 119%. It’s a great place to start picking up exposure to the uranium bull market.
Another option is the Global X Uranium ETF (URA). It holds shares in a basket of leading uranium explorers, miners, and refiners. So it’s a “one-click” way of getting broad exposure.
It won’t do as well as some of the smaller explorers… or best-in-breed miners… I cover at International Speculator. But it’s a good start.