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Hedge funds stockpile uranium as price surges

Matt Oliver

Jan 2, 2024 – 5.07am

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Hedge fundsare stockpiling barrels of rawuranium as the nuclear fuel’s price surges to 16-year highs.

As many as50 funds are believed to have bought and stored uranium concentrate, known as“yellowcake”, at a facility run by US processing firm ConverDyn alone, asspeculators bet that prices are set to spike.

Oneprominent fund said to be amassing yellowcake is Anchorage Capital Group, theNew York firm that started piling into the metal after selling MGM Studios,which owns the film rights to the James Bond franchise, to Amazon.

Otherplayers amassing even larger stockpiles including uranium investment trusts which have built portfolios worth billions of dollars at today’s prices, such as London-listed Yellow Cake Plc and the Toronto-listed Sprott Physical Uranium Trust.

NikkoCollida, vice president for business development at ConverDyn, said: “Whatyou’re seeing with these investor types is that they’re just buying andholding.

“We’ve hadsome accounts that are accumulating more pounds than you would normally haveseen in the past.

“Withnuclear, it’s always in a state where supply is reacting slowly to demandchanges. We’re at a higher moment of under-supply at the moment.”

It comesafter the spot price of uranium surged from about $US49 per pound at the startof 2023 to $US86 towards the end of the year. At the start of 2020, it stood at$US24 per pound.

Experts saythe increases are being driven by a huge global supply deficit, with the amountof uranium required by existing and under-construction nuclear reactors dwarfedby the amount being produced.

There wasdemand for about 180 million pounds of uranium (81.6 million kg) in 2023 butonly 135 million pounds of supplies, according to London-based research firmOcean Wall.

Analysts atMorgan Stanley have also picked the metal as their top commodity choice,predicting it will surge higher to $US95 per pound by the second quarter of2023.

Someinvestors believe it could surge even higher, as they argue that there is noquick solution to the shortfall.

A further61 new nuclear reactors are under construction globally, as countries seek toslash their carbon emissions, with hundreds more planned.

Meanwhile,it takes a decade or more to bring new uranium mines online, while the handfulof mothballed mines that can be brought back online are only likely tocontribute an extra million pounds or so per year, according to Ben Finegold, auranium specialist at Ocean Wall who advises hedge funds.

He said:“The hedge fund interest is that they’ve never seen a commodity story in whichthe underlying price is up four times and the supply response will be so slow.

“If theuranium price were to hit $US500 a pound tomorrow, it would do very little formeaningful volumes of supply in the short to medium term. And you cannot saythat about other commodities.”

SeanBenson, director of BNF Capital, the London-based office of the billionairePerodo family, raised seed funding for a dedicated uranium fund known as TeesRiver in 2019.

Since then,the value of the fund, which invests in uranium stocks, has risen nearlyfour-fold to $US280 million ($411 million).

He said:“We just felt [in 2019] that there was already a position where you were movinginto a supply deficit.

“But one ofthe big surprises today is that sentiment on the demand side has changedcompletely.

“Previously,there wasn’t much of a discussion about nuclear being the answer to climatechange. Now there’s clamour from pretty much all politicians.”

Yellow CakePlc, the London-listed fund that exists solely to buy uranium and hold it, hasamassed a war chest of almost 22 million pounds of the radioactive metal nowvalued at $US1.7 billion.

And theSprott Physical Uranium Trust has amassed 63 million pounds, worth about $US5.6billion today.

Betweenthem, the two trusts hold the equivalent of around 60 per cent of global annualsupplies.

Mr Bensonsaid his base case for Tees River predicts uranium spot prices will surge tobetween $US150 and $US200 as soon as next year.

“I know itsounds crazy,” he added. “But if large macro funds start playing thisinvestment, and sequestering uranium themselves, there aren’t many ways it cango.”

TheTelegraph London