BOE (ASX) Pent-Up Uranium Bull Will Eventually Explode Higher

Originally posted by QPR69 ↑

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| By Nick Hodge Written Wednesday, December 7, 2016[/table]
Uranium remains one of the strongest contrarian plays in the energy and resource markets right now.
Spot prices of ~$18.00 per pound of U3O8 are the lowest they’ve been in 13 years. That’s below the cost of production for many uranium producers, which has taken much supply offline.At the same time, a massive wave of demand is coming. China is building 60 nuclear reactors that will be seeking fuel around the same time.
According to Cameco (NYSE: CCJ) — the world’s largest publicly-traded producer — there are 500 million pounds of uranium that will need to be purchased in the next 10 years.
Utilities in North America and Europe will have to hit the market as well. They’ve been complacent at these low prices but when they come to the market over the next few years they’ll likely have to bend to the terms of producers — which means higher prices.
After all, low prices beget higher prices. Shuddered projects are the precise reason uranium prices have to rise: the supply won’t be there when the utilities and Chinese come calling. And remember, the cost of uranium fuel to run a reactor is a minuscule portion of a reactor’s overall costs — so utilities care little if uranium is $40 or $80 per pound.
Cantor Fitzgerald, among many other institutions, are calling for supply deficits and resultant higher prices.

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A doubling of prices from current levels, and perhaps much more, is certainly well within the realm of possibility over the next few years, which would drive uranium stocks higher by many multiples.
Fukushima is now well in the rearview mirror. And Japan itself has said that nuclear will remain a vital part of its energy mix. As I’ve said many times: per kilowatt-hour of electricity generated, nuclear energy is the safest source the world has ever seen.
And not only is it safe, but it’s clean. It is the only emission-free source of baseload electricity generation the world has ever seen.
That is a fact. Facts mean things. If you want to combat climate change in any meaningful way, shunning the only source of clean baseload power you have is simply not an option.
It is now an oxymoron to be an environmentalist and anti-nuclear. And moronic as well.
There’s also the security of supply issue.
The U.S. has the largest nuclear fleet in the world with ~100 operating reactors supplying some 20% of our electricity. Yet the U.S. only produces 10% of its own uranium needs, making it more reliant on foreign sources of uranium than it ever was on foreign sources of oil.
Well over half the world’s uranium comes from Kazakhstan, Niger, and Russia. Worse, many mines in those countries operate under horrid conditions with terrible environmental implications. In a world where consumers care where their products come from, sooner or later they will demand security, sustainability, and modern working conditions for uranium as well.
And for secure and safe supply to come on in first world countries uranium prices must rise.
With uranium equities down more than 90% since the incident at Fukushima — as evidenced by the Global X Uranium ETF (NYSE: URA) — now is certainly the time to invest.

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It’s not hard to find the best ways to invest in uranium companies.
For starters, nearly 90% of global uranium production comes from just nine companies.
You can’t invest in KazAtomProm or ARMZ (now owned by Rosatom), as they are national nuclear companies of Kazakhstan and Russia, respectively.
Cameco is a fine way to invest in uranium production, as is Areva, though with the latter you’re investing also in reactors and not just uranium mining. But other large producers like BHP Billiton and Rio Tinto are diversified miners and not pure plays on uranium.
You could also invest via the Global X ETF I already mentioned. Here are its top holdings:

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But for the most leverage and potential upside in the uranium space, the place to invest is directly in the junior uranium explorers. They always rise by the highest multiples in a uranium bull market.
That ETF holds two: Nexgen Energy and Fission Uranium. They each have world-class deposits in Canada.
And there are plenty of others that you can take a look at.
When you do, just remember that management, jurisdiction, and grade matter.
The biggest winners in the coming uranium bull market will be well-run explorers with high-grade assets in known safe jurisdictions.
I’d be seeking them out sooner than later as prices at the end of the year are always debased because of tax loss selling.
Call it like you see it,
Nick Hodge
@nickchodge on Twitter
Nick is the Founder and President of the Outsider Club, and the Investment Director of the thousands-strong stock advisory, Early Advantage. Co-author of two best-selling investment books, including Energy Investing for Dummies, his insights have been shared on news programs and in magazines and newspapers around the world. For more on Nick, take a look at his editor's page.
*Follow Outsider Club on Facebook and Twitter.
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QPR,

Good read.

If he's right, we won't be drinking coffee, it'll be something with a cork in it.

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