How Could Uranium Multiply Your Savings?

I would like to introduce you to my favorite investment idea. The one that has the potential to multiply your savings in the short/medium term and set you up to meet your financial goals: Investing in Uranium. It sounds crazy, right? Bear with me until the end and it will all make sense. But first, let’s take a look at the history of the last 20 years to have a general overview.

20 years of uranium in a nutshell

Around 2006 the price of the uranium was similar to now. The price was slightly rising because it started to be scarce. Until when one of the biggest mines, Cigar Lake, got flooded, spooking the markets and forcing the price to shoot to almost 150$/lb. ( see Graph below)

In 2011 the nuclear incident in Fukushima happened, causing the shutdown of the whole Japanese nuclear fleet since then. Because Japan was no longer consuming, the market was flooded with uranium, causing a decline in price during the rest of the decade. Remember the supply/demand dynamic: More supply means lower prices, less supply means higher prices. After this, the price went below the cost to incentivize new production (65$/lb), which means that no new mines have been built in recent years.

Finally, the pandemic hit, and most of the mines in the world shut down for over 2 years, leaving the world just using the inventories.

Now that you know the context, let’s see how we can profit from the situation.

Where is the price of Uranium going?

We know that nuclear energy represents 10% of the whole electricity production worldwide. We also know that it is a key energetic component of many countries. So because it is important if demand rises more than supply, the price will go higher. 

This is shown below in the forecast of the World Nuclear Fuel Report, which I have borrowed from the Nexgen Energy website. In this graph, you can see that in 2025 all the existing mines will have to be fully working to meet the demand, and from 2027 there will be a deficit in production unless we build new mines. To build new mines takes at least 10-15 years. This means the price of uranium will rise considerably.

If we expect the Uranium price to be higher, we will expect the uranium equities to go higher as well. In the previous uranium run, back into 2007, there were companies that made 5x, 10x, 20x and even 100x times the money invested. So trust me when I say that this thesis is worth researching. But only if you have the stomach to handle the volatility.

But, How to invest in uranium to multiply your savings?

Basically, you have 3 simple options. All of them trade like a stock so I will break it down for you:

1. Sprott Physical Uranium Trust (U.UN): This is like buying Uranium through a third party that will store it for you. Although you will never get your hands on the commodity, sorry. This is the lowest (not low) risk play.
   
   
2. Sprott Uranium Mining ETF (URNM): As I explain in my previous post, you can buy the whole sector through this stock. It has medium risk (in the uranium context).
   
   
3. Uranium mining companies: You can check my favorite picks in my Public stock portfolio for inspiration. But watch out. This stuff is very volatile but hopefully very rewarding in the end.

In summary, uranium is a key component that has no substitute. The industry has been depleted due to the last decade’s events. We have been consuming the inventories and the price is still under the production cost.

Ultimately, If the price doesn’t go up, the lights will go off, so we could say that the probabilities are high that this occurs. And, because it is an extremely volatile sector, it also has the potential to set you up to meet your financial goals. This is just the best investment thesis of all time in just 3 minutes read.

More references

Remember that this is not investment advice. You should do your own research and make your decisions based on that. But to help you get started, I will leave you some references.

1. Uranium insider, run by Justin Huhn, offers a subscription to his specialized newsletter, where he tells inside out what is going on in the sector and where to invest. It is like 400$ per year. I guess it is worth paying it if you don’t have time to do the work. Also, he publishes almost every day on his youtube channel.
   
   
2. Check the Rick Rule’s interviews in Resouce Talks. Rick develops the uranium thesis simply and eloquently. Worth watching to understand the general concept.

Finally, If you have found some value in this, hit the subscribe button and I will keep you posted on more killing investment ideas.

Designed by brgfx / Freepik