”We believe the bearish bets now leveled against the junior uranium equities—particularly the Australian names—will, in time, prove just as misguided as those made against natural gas producers in 2020. And, in our view, the potential upside is nearly as dramatic. We encourage investors to consider assembling a portfolio of these junior uranium developers; the prospective returns, given the current dislocation, could be extraordinary.”
Goehring & Rozencwajg Natural Resource Market Commentary, May 2025
A Uranium Short Squeeze?
Back in 2018, we posited that financial players—ever alert to overlooked corners of the commodity world—would emerge as a dominant force in uranium pricing as the bull market unfolded. In an essay titled “New Sources of Demand Tighten the Market,” we described the early signs: institutional capital, formerly a spectator, had begun to wade directly into the physical uranium trade. “Since we last wrote,” we noted at the time, “another source of unexpected physical demand has entered the market—one that we believe could become substantial as the bull market unfolds.”
The then-obscure Uranium Participation Corporation, a closed-end trust that quietly held physical uranium, had suddenly become a favored vehicle for these new financial actors. Two more closed-end funds followed soon after, expressly designed to meet this burgeoning appetite. In subsequent podcasts, we remarked—perhaps with less surprise than resignation—that it would not be long before hedge funds, armed with capital and creativity, discovered ways to influence the uranium spot market through these very instruments.
A typical hedge fund manoeuvre unfolded along the following lines: First, assemble a portfolio of uranium equities—names poised to benefit from a rising spot price. Next, acquire a sizable position in the Uranium Participation Corporation—later rechristened the Sprott Physical Uranium Trust—and bid its market price to a premium over its underlying net asset value. At that point, the trust would issue new shares in order to realign its price with NAV. The proceeds from that issuance would then be deployed to purchase physical uranium, exerting upward pressure on the spot price—thereby boosting the very equities that initiated the trade. It was a circular, elegant bit of financial choreography, and it gained widespread favor following Sprott Asset Management’s acquisition of the old Uranium Participation Corp in July of 2021.
Sprott made no secret of its ambition: one of the Trust’s stated purposes was to tighten uranium market by accumulating the remaining surplus of physical material still held by utilities and traders—stockpiles that had lingered since the aftermath of Fukushima. Whenever the Trust’s shares traded at a premium to net asset value, it would promptly issue new stock, deploying the proceeds to acquire as much physical uranium as the market would yield. In hindsight, Sprott’s campaign was remarkably effective.
In July 2021, when Sprott assumed control of the Trust, uranium traded at $32 per pound and the vehicle held 18.2 million pounds of the metal. Just two and a half years later, the Trust’s holdings had swelled to 63 million pounds, and the spot price had surged to $106. Hedge funds and other speculative players had succeeded not only in cornering a meaningful portion of the uranium market—but in crafting a compelling bullish narrative, amplified through their buying stewardship of the Sprott Physical Uranium Trust.
Still, when hedge funds speak in unison—particularly in commodities—prudence suggests one should begin looking for the exit door. By late 2023, sentiment among speculative players had grown euphoric, and in hindsight, it served as a textbook warning. Uranium prices peaked in January 2024 at $106 per pound—nearly a sixfold increase from the lows of 2017. And though the structural fundamentals for uranium remain increasingly favorable, the market was due—indeed, overdue—for a correction.
Since peaking over a year ago, spot uranium prices have retreated by roughly 35%—a move well within the bounds of a healthy correction in the context of a long-term bull market. What has proven far more intriguing, however, is the remarkable shift in hedge fund sentiment. Having embraced the trade with near-religious fervor at the top—just over a year ago—many of these same funds have now adopted an equally zealous bearish stance. Where once the Sprott Physical Uranium Trust was the lever by which they sought to elevate the uranium price, it is now being employed as an instrument to press it down—along with the equities influenced by it.
This reversal was, candidly, not one we anticipated. As noted, the underlying fundamentals in global uranium markets have only improved over the past eighteen months. That hedge funds—having entered late into the bullish trade of 2023—would so quickly and forcefully reverse their positioning, and turn bearish, was not a scenario we had foreseen.
And yet, here we are. The Sprott Trust, so recently a symbol of speculative optimism, is now a vehicle for propagating pessimism. From our perspective, the resulting dislocation presents investors with a rare and compelling opportunity—especially in uranium equities. Hedge funds have built substantial short positions in a number of developers, particularly those advancing projects in Australia. We remain confident that the uranium bull market is far from over, and that the sharp pullback in the equities—engineered, in part, by short-selling hedge funds—has created a moment of genuine opportunity for the long-term investor.
On the way up, hedge funds were among the most enthusiastic buyers of the Sprott Physical Uranium Trust, bidding its shares to a premium over net asset value. Today, the same funds are sellers—and, in many cases, short sellers—driving the Trust to a pronounced discount. As of this writing, the Trust trades at a 10% discount to its stated NAV.
This discount carries several bearish implications, particularly in the near term. Most notably, the Trust is effectively barred from issuing new shares—its principal mechanism for raising capital to acquire additional physical uranium. Since uranium prices peaked in the first the quarter of 2024, the Trust has consistently traded below NAV, rendering it unable to participate meaningfully in the spot market. Over the past twelve months, reflecting this structural constraint, the Trust has issued very little new equity and acquired only 3 million additional pounds of uranium.
With hedge funds now broadly positioned on the short side of the uranium trade, their incentives have inverted. Keeping the Trust below NAV has become tactically advantageous, and persistent rumors suggest that whenever the Trust’s price drifts near par, aggressive selling resumes. In the absence of the Trust’s steady bid, the spot market has softened—and prices have declined by 35% over the past 14 months.
A glance at the spot price alone might tempt a speculator into declaring the uranium bull market dead and buried—that a new bear market has begun. But a deeper look, particularly at the term market, tells a different story. As we noted in our First Quarter Natural Resources Commentary, while spot prices have declined by 35%, term prices have continued their ascent and now sit 8% higher than they were at the spot peak in January. With the Sprott Physical Uranium Trust sidelined, hedge funds have seized the opportunity to craft and sustain a bearish uranium narrative. Just as they once drove spot prices upward using the Trust as their preferred lever, they are now employing it to push prices downward—once again making it their instrument of choice.
There is, however, an additional wrinkle to the current hedge fund strategy. The Sprott Trust has an estimated annual operating cash burn of roughly $20 million. At present, it holds only about $7 million in cash. Hedge funds are circulating rumors that the Trust will soon run dry and be forced to sell physical uranium from its holdings to meet its operating costs. While the Trust has publicly stated it has no intention of selling uranium under any circumstances, hedge funds counter that financial necessity may soon override principle. The fear, they suggest, is that even a single sale would shatter the Trust’s credibility—and open the door to future liquidations at any time. Whether true or not, the mere specter of such a scenario has added a heavy layer of uncertainty to an already fragile market.
Using this narrative, hedge funds have amassed large short positions in a range of junior uranium equities—particularly in Australia. In several instances, short interest has reached a staggering 35%, despite the fact that these companies carry no debt. The scale of the bearish wager is striking, and it brings to mind another moment in commodity investing history: when hedge funds piled into short positions on natural gas producers like Range Resources and Antero, citing high leverage and low prices as harbingers of bankruptcy.
We disagreed with that view at the time—and were vindicated. Since bottoming in late 2020, shares of Range Resources have risen nearly twentyfold, while Antero has surged more than fiftyfold.
We believe the bearish bets now leveled against the junior uranium equities—particularly the Australian names—will, in time, prove just as misguided as those made against natural gas producers in 2020. And, in our view, the potential upside is nearly as dramatic. We encourage investors to consider assembling a portfolio of these junior uranium developers; the prospective returns, given the current dislocation, could be extraordinary.
We have spoken directly with representatives of the Sprott Physical Uranium Trust and are confident that their short-term liquidity needs will be met without difficulty—eliminating the need for any physical uranium sales. But even if a sale were to occur, we believe the impact on spot pricing would be negligible. Our sources suggest that Cameco—custodian of much of the Trust’s inventory—is itself materially short and would welcome the opportunity to acquire pounds. The physical uranium market is, in reality, far tighter than consensus implies, and the prevailing narrative about the Trust’s financial vulnerability is, we suspect, about to unravel. For investors, this presents a rare and timely entry point—especially among the junior names.
The uranium bull market remains intact. It is, in our judgment, only a matter of time before spot prices resume their upward march, forcing short sellers to retreat. The fundamental case continues to strengthen. China has just announced plans to build ten new nuclear reactors. Japan has restarted another unit idled since Fukushima. A Danish investment firm, 92 Capital, is in the process of raising €350 million to invest across the nuclear supply chain, citing a growing global consensus around nuclear energy’s role as a carbon-free and reliable baseload source. Even Namibia—already a significant uranium producer—has declared its intent to construct a nuclear power plant to meet surging domestic demand.
The stream of news from the global nuclear power sector grows stronger by the week. Demand is rising. Supply remains constrained. The structural gap between the two is widening—regardless of the pessimistic story now favored by the hedge fund community.
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