We asUranium investors are all well aware of the shortfall in...

We asUranium investors are all well aware of the shortfall in Uranium. Although theUranium market is somewhat opaque there seems little doubt about this shortfallbeing real. There are however quite different estimates on how large thisshortfall is, I have heard as low as 30M lbs per annum to as high as 70M lbsper annum on a global demand of approximately 180 to 200 Mlbs per annum and globalproduction being in the 130 to 150M lbs.. Eitherway lets assume the shprtfallis approximately 50M lb per annum as of recent (NOT current!)

Yet on therecent Red Cloud conference, one of the speakers said the following: “To coverthe shortfall about 80% of current Uranium projects have to be brought intoproduction…Normally only 1 or 2% of project make it to production”.

So how canthat be? We know there are several larger projects like Arrow of Nexgen and amultitude of smaller ones in the pipeline…All up these would supply multiplesof 50M lbs per annum. So to cover that 50M lbs per annum might be hard and takesome time but it does appear doable.

I want tooutline here why believe the 50M lb per annum is nowhere near enough to cover the shortfall in Uranium supply. The situation is much more skewed in our favor then these numbers show due to the following reasons.

1: Thenumbers don’t take into account overfeeding vs underfeeding. The world recentlyswitched from underfeeding to over feeding. This ads between 30 to as much as50M pounds to demand!

2:Financial/investment demand. All uranium traders, the SPUT and Yellow Cake.Demand unknown…Currently running at close to 50M pounds per annum, but thiscould be lower but also (much) higher.

3: Depletedreserves and inventories. Currently utilities in the US and Europe hold a(dangerously) low amount of Uranium and fuel inventories. The US and Europeaccounts for about 50% of global Uranium demand. If current figures are correctthey now hold less the 2 years worth of inventories. If they wanted to bringthat back to say a more reasonable 5 years in the next decade that alone wouldbe 1.5 years of global demand in 10years or add 15% for that period to global demand(NOT accounting for growing demand, which would also increase the neededinventories) or about 25 to 30M lb per annum for the next decade.

4:Increasing demand. There are currently 54 reactors under construction and mostwill be online within 5years (many much sooner). Also Japan will be restartinganother 20 to 30 reactors over the coming years. The recent models assumed noreal growth in demand since new builds in many China and India would be offsetby shutdowns in the west…Most shutdowns (with only Germany as an exception, Ithink they too will turn) have been canceled. This should add 15 to 20% or say25 to 35M lb per annum to demand. Many more reactors are planned and proposedand we haven’t factored in SMR either. This won’t add to short term demand, butwill very much be a factor in 5 or 10years.

5: Depletingmines. Some currently producing mines are getting closer to the end of theirlife. For instance from my understanding the Cigar Lake mine of Cameco will runout of ore around the end of this decade.

6: Supplydisruptions. Russia is a recent example. But many factors including wars,geopolitical tension to extreme weather or natural disasters can impact mines.It might therefore be prudent to keep large stockpiles both on company andgovernment levels. It might also be wise to at least have some overcapacity forproduction. Basically everything opposite to the current situation!

So tosummarize: The shortfall for the next 5 years will be many times the implied50M lb per annum. We can’t get to an exact figure since there are significant variablesbut the idea that an increase of 50M lb per annum is going to fix the problem,in my opinion is plane fals. So I think the speaker at the Red Cloud conventionwas correct. Most, if not all current projects that are at or progressing to a feasibilitystudy will have to come online…And I doubt this is even possible. There can bemany technical and mining issues while progressing a project. And we aren’t talkingabout permitting, legislation and legal battles yet.

I for onewill be pulling out the popcorn when this train finally hits the brick wall itis heading for. There is currently extreme complacency in these sectors…I thinkit will soon turn to absolute panic..and a bidding frenzy with every projectgetting tons of money thrown at it, just to scramble to get some of them onlinein time.

I for onewill continue to add on every occasion I can. I think we will be rewarded and Ithink it possible some of our wilders dreams will come true…I think selling at$100 uranium would be an outright mistake since I think it will just be thestart!

Just myopinion. Not advice.