We reached the end of our meeting and it was surprising to us that no one mentioned uranium. It has been a popular but disappointing investment theme over the past few years. That there was little interest is perhaps the most bullish signal.

“I honestly was going to present the uranium thesis but thought someone else would do it,” said a participant. He was amazed too. The uranium spot price is at a four-year high of $33.7 per pound, a 35 percent increase since March. “Uranium is one of the world’s best performing commodities. This is a bull market.” 

Cameco has indefinitely suspended production at its Cigar Lake mine, the world's largest operating source of the metal, after temporarily putting the facility on maintenance due to the pandemic. Its McArthur River mine was already suspended earlier due to uranium price weakness. Kazatomprom, the largest uranium producer, has said that it will reduce 2020 production by up to 18 percent, knocking 5 percent of global production offline.

“Inventories have now been drawn down to the point of supply becoming an issue,” said the participant. Reading utility balance sheets, he noted that only Dominion Energy was buying uranium last year to take advantage of low prices. Excelon, Duke, Southern and the others are supply constrained. “Once Covid-19 related problems settle down, they will need to contract purchases.” He sensed fuel buyers are also waiting to see if this spot move was real.

Euratom, the European Atomic Agency, came out with a report recently that also highlighted that utilities need to worry about uranium supply as a key risk. Meanwhile, the US Nuclear Fuel Working Group said it plans to build a uranium stockpile to restore America’s nuclear energy leadership.

The participant said he is only long Paladin Energy, an Australian based uranium producer.

Source: Barchart.com