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Yellow Cake plc (YCA.L)

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  • N
    Napalm
    The uranium spotmarket is drying out fast due to
    ⁃ less U3O8 supply to the spotmarket (Uranium One Covid19 production decrease, Rossing supplying CNNC instead of the spot, Ranger closure, Olympic Dam not increasing production, Kazatomprom not supplying the spot anymore),
    ⁃ more spotbuying from uranium producers (Cameco, Orano, Kazatomprom, Peninsula Energy,..),
    ⁃ the spotbuying pressure from carrytraders remaining for the existing short term contracts they have with utilities and the future spotbuying from some institutional commodity investors)

    With the supply of U3O8 drying out for carry traders in the future carry traders will not be able to renew existing short term contracts with utilities in the coming months and years, so utilities will start negotiating new long term contracts with the few remaining uranium producers (by the way chinese utilities already started --> they bought a 49% stake in one of the mines of Kazatomprom recently --> uranium production that will no longer be available for non-chinese reactors, those non-chinese reactors will need to go elswhere for uranium supply)

    Utilities can try to go to the spot first. Let them try that :-)
    By doing so they will dry the spotmarket even faster!

    They are cornered!

    2 scenario's remain:

    Scenario 1: Utilities start their negotiations of renewal of long term supply contracts now (2020/2021) in which case the uranium price would climb to a 60+/lb in 2021/2022 (imo) and the share prices will climb fast in 2021/2022

    Scenario 2: Utilities wait a bit longer before starting those negotiations (2022/2023/2024) in which case more operational reserves of utilities will be consumed and more UF6 will be bought higher in the fuel cycle, how more the spotmarket will dry up, how more new mining projects will be postponed (Denison Mines, Goviex, Global Atomic,...) and de restart of production of some uranium mines will be postponed (Paladin, Energy Fuels, UR-energy, Peninsula Energy, Boss Resources), how later a bit more uranium production will be available (but anyway still a uranium deficit with those restarts).
    But by doing so utilities will rush into the market in 2022Q4/2023/2024 fighting for available uranium, while the uranium demand of utilities is price inelastic. In that case you probably will see the uranium price increase past the highs of 2007 (130+/lb in 2007 that you have to adjust with inflation impact!)

    So long term is 3 to 5 years, but it could start all of a sudden much earlier.

    Cameco, GXU.V $GLO.TO $FCU.TO ,Energy Fuels, Denison mines, $UEC ,Nexgen, UR-energy,
    Uranium Participation, Yellow Cake, Paladin Energy, Boss Resources, Peninsula Energy, $UEX.TO , Forsys Metals, Deep Yellow, ...
  • N
    Napalm
    A macro uranium supply recap:

    - Uranium demande from utilities is price inelastic;
    - Last lost uranium production: 3 Ukrainian uranium mines of VostokGOK (2 million lb U3O8/y, December 2020), Ranger uranium mine (ERA, 4 million lb U3O8/y, January 2021). Next uranium production decrease: Cominak uranium mine (Orano, 3 million lb U3O8/y, March 2021), Cigar Lake in 2029, ...
    - Covid19 related production decrease: Cigar Lake impacting Cameco and Orano, well development put onhold during months around the Summer 2020 at all JV's in Kazakhstan impacting Kazatomprom, Orano, Cameco, Uranium One (99,70% of uranium production of Uranium One comes from the JV's in Kazakhstan!!), CGN, ...
    - Rossing mine 66% stake takeover by CNNC ==> No spot supply from Rossing in the future anymore;
    - Uranium loan of 5+ million lb U3O8 from Cameco to Orano in 2018. Orano has to give those 5+million lb U3O8 back to Cameco in 2023. That's 5+million lb of future production of Orano that will not go to utilities but to Cameco;
    - Ranger miner was an important spot supplier ==> some small spot selling in the near future, but after that No uranium supply anymore from Ranger;
    - Uranium One is an important spot supplier ==> But with production loss in 2020Q4 and 2021Q1 an Q2 there will be much less uranium spot supply from Uranium One;
    - Olympic Dam will not expand their Copper mine (uranium as by-product) ==> Less future spot supply from Olympic Dam than first anticipated;
    - Kazatomprom is focused on Long term contracts. Their CEO told the public that they will not supply the spot market anymore (April 2020);
    - Cameco, Kazatomprom, Orano, Peninsula Energy, ... are buying uranium in the spot and will continu to do so in the future;
    - Carrytraders need uranium supply from the spot to fullfile their short term contracts with utilities, but the spotmarket is drying out fast!! ==> Carrytraders will not be able to renew short term supply contracts with utilities without variable prices, but "carrying the trade" main purpose is just to protect utilities against variable prices !! :-)
    - Chinese utilities started the renewal of long term uranium supply signed in '2006-2009'. How? By buying mines : 66% stake takeover in Rossing (production cost/lb is higher than 60$/lb) by CNNC (July 2019), CGN 49% takeover of Ortalyk from Kazatomprom (January 2021) ==> all that uranium will not be available anymore for non-chinese reactors. Non-chinese reactores will need to find their uranium elsewhere!! ==> The pool of available future global uranium supply is getting smaller and smaller!!

    Tik tok tik tok Carry traders...
    By consequence tik tok tik tok utilities

    $URNM $CCJ $URA $U.TO
    Yellow Cake, Denison mines, Energy Fuels, Paladin Energy, UR-energy, Peninsula Energy,...
  • N
    Napalm
    Fyi. Today globally there are:
    - 442 operable reactors
    - 52 reactors in construction (14 in China, 7 in India, 4 in South Korea, 2 in Russia, 3 in UAE, 2 in UK, 2 in Slovakia, ...)
    - 100 new reactor constructions planned (41 in China, 14 in India, 21 in Russia, 2 in UK, 2 in Romania, 2 in Hungary, 4 in Egypte, 2 in Uzbekistan, ...)
    - 326 new reactor constructions proposed (168 in China, 28 in India, 23 in Russia, 16 in Saudi Arabia, ...)

    $GLO.TO $GXU.V $UEX.TO $U.TO $URNM
  • N
    Napalm
    https://www.world-nuclear-news.org/Articles/CGN-set-to-take-stake-in-Kazakh-uranium-mining-com

    Well guys, that is a chinese utility renewing it's uranium supply for the future, not by signing new contracts, but by buying mines

    That's uranium that will not be available for non-chinese utilities anymore

    So non-chinese utilities will need to look elswhere for future uranium

    The same happend with the 66% stake takeover in Rossing mines by CNNC from Rio Tinto in June/July 2019

    Next Paladin Energy, Fission Uranium Corp, Bannerman Resources, Forsys Metals?

    The game of the musical chaires with the utilities as participants has started!

    $URNM $PALAF $BMN.AX $FSY.TO
  • N
    Napalm
    After TradeTech and UxC, now Kazatomprom and Paladin are confirming signes that in particular US utilities are coming back to the long term market.
  • N
    Napalm
    The uranium market is like a spectator sport where you all sit in a stadium and watch a car go around the track and bet on when the car will run out of fuel.

    It is not a debate IF the car will run out of fuel its simply a matter of WHEN.

    The more laps (time) go by, the higher the odds.

    $URNM $U.TO $PALAF
  • N
    Napalm
    Short term contracts through Carry traders will most probably be more difficult in the coming years + additional production distruction

    Carry traders get their uranium mainly from the spot.

    Important uranium producers of the spot decreased their supply to the spot (Uranium One due to Covid 19 shutdowns in Kazakhstan (99,70% of Uranium One production comes from JV's in Kazakhstan!)), or even stopped supplying the spot and became net buyers on the spot (Kazatomprom (new policy of the company)).

    Other uranium producers are net buyers on the spot since +-2017 (UR-energy), since early 2018 (Cameco, Peninsula Energy, ...)

    And based on the mining portfolio of Orano and the uranium loan of +- 5million pounds they made when McArther River was put in care-and-maintenance, I presume Orano also became net buyer on the spot (but that last point is an own interpretation of the situation of Orano, the rest are published facts)

    In the meantime the supply to the spot from the Ranger mine ends early 2021 and Olympic Dam cancelled the idea to increase their production in the future (uranium as a by product for the spot).

    Rossing Mine in 2019: 75% of production solde through LT contracts and 25% to the spot. But after the successful acquisition of Rossing mines by CNNC (25 July 2019) those 25% that went to the spot in the past, will most probably go to CNNC now to supply their existing reactors and future new reactors... Again, uranium supply that will cease to supply the spot (imo)

    Next uranium production decrease is:

    December 7, 2020: uranium production suspended in all 3 Ukrainian uranium mines of VostokGOK and possible bankruptcy in the coming months --> an additional loss of 2 million pounds of annual production in 2021

    December 14, 2020 second shutdown of Cigar Lake ==> increasing the spotbuying by Cameco and Orano!!

    In the meantime, more and more existing uranium mines are getting depleted, next:
    - Cominak (Orano, Niger, closure March 2021 --> 3million pounds of annual production disappearing)
    - Ranger (ERA, Australia, closure January 2021, more then 4 million pounds of annual supply to the spot that disappears in the January 2021)

    Carry traders need uranium producers for their uranium needed to honor their supply contracts. Kazatomprom was very clear early 2020: "We are not supplying the spot anymore."

    Tik tok tik tok carry traders
    And by consequence tik tok tik tok utilities...

    $PALAF

    Cheers
  • N
    Napalm
    When we talk about the shutdown of Cigar Lake we all talk about Cameco reduced production.

    But Cameco only owns 50,025% of that production of Cigar Lake!!

    The other owners are:
    ⁃ Orano (37,1%)
    ⁃ Idemitsu (7,875%)
    ⁃ Tepco (5,00%)

    So the production of Orano is also impacted seriously!

    The production of Orano in Kazakhstan will be impacted now and coming months as well, while:
    ⁃ the Cominak mine (Orano, Niger, closure March 2021 --> 3million pounds of annual production disappearing) is getting depletted;
    ⁃ Orano already has a 5.4million pound uranium loan from Cameco they got when McArther River was put in care-and-maintenance in 2018 due in 2023

    So Cameco will buy on the spot to compensate the lost production, Tim Gitzel comfirmed that. But Orano is also going to increase their spot purchases!!

    And don't forget that Kazatomprom needs to buy uranium on the spot too!

    While the inflow of uranium in the spot has been impacted too (Uranium One, Rossing mines, ...) --> see my post about the growing problem for carrytraders

    And to complete the picture:
    ⁃ more and more institutional investors are getting the uranium sector on their investors radar now
    ⁃ apparently some commodity investors are even talking about squeezing the market now (I couldn't verify that info)

    Cheers
  • N
    Napalm
    How undervalued is the entire uranium sector at the moment?

    The entire market cap of uranium sector (15 billion USD) =
    - 2% to 3% of the market cap of Tesla (540 billion USD)
    - 35% of the market cap of Barrick Gold (almost 43 billion USD)
    - 31% of the market cap of Newmont Corp (almost 43 billion USD)
    - 9% of the market cap of Exxon Mobil Corp (almost 48 billion USD)
    - 8% to 9% of the market cap of Chevron Corp (almost 169 billion USD)
    - 11% of the market cap of Royal Dutch Shell (almost 140 billion USD)
    - 12% of the market cap of Boeing (126 billion USD)
    - …

    And that while:
    - Demand for uranium is price inelastic!
    - A lot of long term supply contracts of western countries need to be renewed in the coming years è price discovery is coming, because uranium miners will not restart existing mines and surely not take the risk in build a new mine without the cover of signed off take agreements before the start of the mine construction.
    - A lot of new reactors are build in China, India, … New reactor cores need 3 times the normal fuel renewal of existing reactors

    Patience and diversification in your Uranium positions is key here

    The question isn't IF it will happen, the question is WHEN it will happen.

    Cheers
  • N
    Napalm
    Next uranium production decrease:

    December 7, 2020: uranium production suspended in all 3 Ukrainian uranium mines of VostokGOK and possible bankruptcy in the coming months --> an additional loss of 2 million pounds of annual production in 2021

    In the meantime, more and more existing uranium mines are getting depleted, next:
    - Cominak (Orano, Niger, closure March 2021 --> 3million pounds of annual production disappearing)
    - Ranger (ERA, Australia, closure January 2021, more then 4 million pounds of annual supply to the spot that disappears in the January 2021)
  • N
    Napalm
    When you are aware of the long term macro setup of the uranium and nuclear sector, then Cameco becomes a very easy long term investment

    Cigar Lake now (until 2028) and they still have McArther River that they only will restart when they got sufficient additional long term supply contract to justify a restart of McArther River.

    And Cameco also has production from their JV in Kazakhstan

    Cameco has the tier1 assets to go beyond 2030 without the need of additional exploration. And still, they have some exploration JV's in Canada and Australia that are semi-active are can be reactivated.

    Cameco will remain one of the few big producers in the sector beyond 2030 without the need to find new resources.

    A idea for the more conservative investors (imo) to think about: +-60% in Cameco and 40% in 3 or 4 different positions in well advanced promising projects / producers in care and maintenance (Denison, FCU, Nexgen, Global Atomic, Goviex, Energy Fuels, UR-energy,...)

    Those 40% will act as an insurance for the 60% in Cameco. I doubt it, but if Cameco would go bankrupt or have production problems in the next couple of years, your 40% will soar and becoming multi baggers

    If Cameco doesn't go bankrupt or have production problems you would have a potential long term 3x gain on 60% of your investment and a potential long term 5x to 10x gains on the remaining 40% of your investment (this is my own opinion)

    Remember, the uranium sector is a tiny sector to invest in, so very explosive when a broader investors community startes to invest 1% to 5% of their portfolio in the uranium sector

    I'm a long term investor and I have 20+ different positions in the uranium sector with only a bit less then 20% invested in Cameco because I'm more dynamic then my conservative idea of 60/40.

    Cheers
  • N
    Napalm
    The investors will realise that Uranium sector is in a multi years bullmarket (since early 2018) when it will be to late to take positions in the sector...

    Look at the conversion Price that moved again higher, a week ago at 22.00/KgU --> this is the consequence of the U supply bottleneck --> this significant move higher this year will push the Uranium price significantly higher too.

    This is not a IF, but a WHEN scenario.

    And ones it startes to go up it will go very hard, because the Uranium sector is a very small sector to invest in combined with the fact that uranium is price inelastic!

    The only thing is you need to be patient. It's a long term play!

    Ultimately the U price will rise, but not before the US Uranium and Nuclear investigation is cleared.
  • N
    Napalm
    FYI: The spot price is increasing faster compared to the past 2 weeks
  • D
    Daan
    How much uranium is stored per stock?
  • N
    Napalm
    Rick Rule shares his 11 uranium companies worth taking a look at. Rick Rule Top 11 URANIUM STOCKS. *� GET 1-ON-1 MENTORSHIP �* https://www.baby-investments.c...
    Rick Rule shares his 11 uranium companies worth taking a look at. Rick Rule Top 11 URANIUM STOCKS. *� GET 1-ON-1 MENTORSHIP �* https://www.baby-investments.c...
    m.youtube.com