Welcome To A New Uranium Bull Market

Welcome To A New Uranium Bull Market



By Gerardo Del Real
Written Dec. 04 2017

What a difference a month makes. This time last month the spot price of uranium was floundering between $19-$21/lb. with no near-term catalyst on the horizon.

Some of the smartest minds in the business, including James Dines, Jeff Phillips, and Outsider Clubfounder Nick Hodge, had called a bottom in uranium, and I followed suit in August, making the case that we were months away and that it was time to start positioning aggressively.

The timing could not have been better (a little luck goes a long way) and on November 9, 2017 Cameco announced that by the end of January 2018 it would be shutting down production from the McArthur River mining and Key Lake milling operations in northern Saskatchewan for at least 10 months.

Cameco should be commended for making the tough but necessary decision.

In the short term it means a reduction of approximately 845 jobs.

In the mid term, Cameco has provided the cover for other companies to cut and send a clear message to the market that they are not willing to continue producing at unsustainably low prices.

Consider that McArthur River is on the low end of the cost curve. Reading through Cameco’s financials, the mine — one of the best in the world — has costs in the mid $30s.

It is estimated that the cut will result in approximately 13.7 million pounds of expected 2018 production. That equates to roughly 9% of forecast primary supply.

This adds to the 10% Kazakhstan cut earlier this year, which amounted to approximately 5 million pounds. The spot price of uranium will not go straight up — expect ebbs and flows — but the trend is clear.

I wrote recently that if we didn’t see prices back up at the $40 level there would be more cuts and that major producers were on our side.

Just this morning Kazatomprom announced its intention to reduce planned uranium production by 20% under Subsoil Use Contracts of Company enterprises, in order to better align its output with demand.

The scheduled cuts will be enacted for a period of three years commencing January 2018.

This will result in the production deferral of 11,000 tonnes over the period, of which an estimated 4000 tonnes will be cut in 2018 alone, representing approximately 7.5% of global uranium production for 2018 as forecast by UxC.

Galymzhan Pirmatov, Chairman of the Management Board of Kazatomprom, commented:

"Given the challenging market conditions, and in light of continued oversupply in the uranium market, we have taken the strategic decision to reduce production in order to better align our production levels with market demand. We believe that these measures strongly underline our commitment to ensuring the long-term sustainability of uranium mining; a critical component in the generation of clean, carbon free electricity around the globe.”

As early as August I explained why more cuts were coming when I wrote:

Kazatomprom will go public in 2018. For years it’s been gaining market share by flooding the market.

However, I don’t know any company going public that doesn’t look to strengthen its investment thesis.

The easiest way to do so will be by bolstering up the cash flow and it will do that by curtailing the amount of uranium it’s providing the market, which will send prices higher.

In January, it cut production by 10%. I don’t believe that will be the last cut.

The cut has many of my favorite uranium juniors up between 7-15% this morning. This is just the beginning.

Welcome to a new uranium bull market.

To your wealth,



Gerardo Del Real