I’m betting on Uranium!
Uranium stocks have been tanking, tanking and tanking. Uranium spot price is at a 13 year low. Analysts, investors, and pundits speculated that a recovery is coming in 2013, 2014,2015,2016… Now 2017 is just around the corner!
This is crazy. What is happening? Is this commodify no longer needed?
Since the Japan earthquake in 2011, Uranium spot price have dropped from $55.25/lb to ~$18.00/lb. A ~66% drop! (FYI, uranium is used as fuel for nuclear reactors.)
I’ve been closely watching Uranium for the past
2 3 months, and this continuous drop is unsustainable. Uranium producers/miners absolutely CANNOT be profitable under the current circumstances. Uranium companies lose money every time they sell uranium at spot price.
You can’t lose forever. Commodity prices are cyclical based on supply/demand/speculation of supply/demand. Even the Cubs ended their a 108-year World Series championship drought.
But no one really has the crystal ball. I, like many others, am just speculating. However, the upside of speculating can be quite rewarding.
Just an Example: Energy Fuels (TSX:EFR)
Right before the last uranium bull market, EFR was trading at $4.50 CAD/share (post reverse split) at the end of 2005. At the peak, EFR traded at $200 CAD/share. And looking at EFR price now, it’s only trading at $2.24 CAD/share. Imagine the upside if the long anticipated uranium bull finally returns. I can certainly put money in safe stocks right now and get a 4% annual gain, but looking at how bearish the uranium market is right now really really makes me greedy.
I have a list of counter arguments below. I will put my thoughts on the counter arguments in my next post.
Counter Arguments for why the Uranium Bull is not around the corner.
- The developed world is reducing the number of nuclear reactors globally and the anticipated growth in China and India might not be met
- Alternative energy sources like natural gas is really cheap right now and can operate cheaper than nuclear power.
- Nuclear Power is a controversial topic. Not everyone approves of nuclear power. NIMBY
- Japan is taking way too long to restart their reactors
- Thorium will replace Uranium
- Renewable energy is the future, not nuclear.
That’s all for now. I’ve only given a very high level overview on why I’m investing in uranium. There are MANY more reasons to justify my decision. I will be writing a post on the catalysts which will trigger the next major uranium rally shortly.
Best of luck all!
DISCLOSURE: I am long EFR. This is not an investment advice.