Afternoon Guys, The interview was good, thanks for posting the...

Afternoon Guys,

The interview was good, thanks for posting the link.

Much of the BKY news we already knew about, but was good to have repeated. PA didn't discuss anything from the announcement yesterday which was a shame. There were some holes in yesterday's announcement I thought.

However, a couple of interesting breadcrumbs to add to the trail in terms of sector dynamics:

- We know of the success of Yellowcake's recent IPO and that they have already secured 8.1m lb from Kazatomprom and, due to their IPO success (additional US$26m raised over and above target) can buy another c. 1m lb from somewhere - either Kazatomprom if they are willing to sell or the spot market.

- PA also mentioned an Australian Fund who is actively investing $100m into the U sector. My guess is that this is Tribeca as recent news reports suggested. We have another clue here as Tribeca appears as a significant shareholder on Yellowcake's register.

- PA also mentioned another, private fund, who has just secured $50m of U. This would equate to c. 2.2m lb and could not have been bought on the spot market without it showing up. Thus, I speculate that this too was taken from Kazatomprom's inventory.

- We also know that UPC successfully raised $23m in the last Q and bought 675k lb of U from the Spot Market.

- Whilst not mentioned by PA, we also know that CCJ has to enter the spot market in the 2H of 2018 to buy potentially 8-10m lb of U to meet contractual obligations now that they have reduced their inventory to their minimum desired level of 13-14m lb and McArthur River is offline.


All of this feeds into PA's comments that market participants are well aware of the demand/ supply shortfall in the years ahead and the unsustainability of current spot/ contract prices (Game Theory).

Players (investment bankers/ funds) are demonstrably entering the market now (as per above) and are front running utilities.

This in turn is accelerating the mop-up of the inventory overhang that utilities have been relying on to provide cheap U for years into the future. They are still currently very complacent about this, but as soon as one utility breaks ranks it would appear that a scramble to secure LT contracted U will commence (i.e. contraian8888 on twitter reporting on comments made by utility buyers at a recent conference over drinks).

Not only is this a "when not if question re price increases" as per Rick Rule, but I suspect that the timing of "when" is no longer a few years away as some analysts suspect.

Instead, through "reflexivity theory" the perception of players within the market (unsustainable U prices) and their subsequent actions (buying U) is in fact causing the very outcome that they perceive (tight U market = price rises).

Cheers
John