In the past few weeks, when laying out the core elements behind the increasingly bullish uranium thesis, we made the following observations:
- The buying frenzy in physical uranium unleashed by the Sprott Physical Uranium Trust would become self-fulfilling, as the rising price of uranium would lead to a higher price in uranium-linked stocks, leading to more buying by producers seeking to lock in lower prices as well as more inflows into stocks and ETFs such as the Sprott Trust itself, which in turn would lead to more inflows and even more buying (the last was confirmed late on Friday when Sprott massively upsized its physical uranium buying program by $1BN to $1.3BN).
- Accelerating ETF inflows would lead to greater investor awareness of the underlying core thesis, leading to even more inflows, even more buying and so on. Indeed the latest snapshot of the URNM ETF shows 8 consecutive days of inflows, including the biggest one-day inflows on record.
- Taro Kano, Japan's administrative reform minister and leading contender to replace prime minister Suga, said Japan needs to restart its mothballed nuclear power plants, in order to realize its goal of achieving carbon neutrality by 2050. Such a reversal from the former nuclear skeptic would mark a sea-change in the nuclear industry and lead to a surge in uranium demand in the coming years which producers would seek to lock in asap.
We left off by saying that more upside is assured "especially if the upward momentum is picked up by the reddit daytrading army." Little did we know that that's precisely what would happen just days later...
So fast forward to today, when Bloomberg has caught up writing that "Uranium stocks surged to their highest levels in a decade amid a buying frenzy by Sprott Physical Uranium Trust that’s seen it amass millions of pounds of the commodity used to power nuclear reactors."
The story is familiar to regular readers: while uranium producers have been rising since last year - which is when we first turned bullish on the sector one year ago - due to Covid-19 related supply disruptions and demand for the commodity from nuclear reactors, the rally only gathered substantial momentum in the past month as the Sprott fund started purchases that propelled the heavy metal to an almost seven-year high.
"It is not a secret that investors’ newfound interest in uranium, predominantly through Sprott’s physical uranium trust, is the driving force behind its resurgence," Morgan Stanley strategists Marius van Straaten and Susan Bateswrote in a note.
It certainly isn't a secret for our readers, as we have been covering this move in details for the past two weeks, but judging by today's price moves it clearly was a secret to most:
Cameco, the world’s second-largest uranium producer, surged as much as 8.5% in Toronto, reaching its highest since March 2011. Other uranium-linked stocks including Denison Mines Corp. also neared their 2011 levels, while NexGen Energy Ltd. hit a record on Monday.
In an attempt to taper investor euphoria, Morgan Stanley said that moving forward, investors are likely to focus on the sustainability of such a rally as the supply and demand fundamentals of the commodity haven’t changed since Sprott started buying. “While coal and natural gas prices are driven up by actual market tightness, uranium’s underlying supply-demand fundamentals haven’t meaningfully changed over the last few months to warrant this price surge,” the Morgan Stanley analysts wrote.
Well, actually... no: Morgan Stanley is dead wrong in their assumption that fundamentals will now be a factor for the simple reason that we were also correct in predicting the imminent arrival of the raddit daytrading crowd.
Indeed, as we read in a separate piece today from the WSJ, according to which "shares of uranium mining companies surged as retail traders from Reddit's WallStreetBets forum focused their energies on the rallying radioactive metal."
Indeed, they did, just as we said they would:
Companies tied to uranium in Australia and the U.K. powered higher Monday, while U.S.-listed companies rose in premarket trading.
Sydney-listed uranium miners Peninsula Energy Ltd., Energy Resources of Australia Ltd. and Bannerman Energy Ltd. all closed more than 25% higher. U.K.-listed miner Aura Energy Ltd. jumped more than 35% and Yellow Cake PLC, a company that acts as an exchange-traded fund for uranium, rose 13%.
Meanwhile, our long-term favorite stock, Cameco, has now become the most-discussed company on WallStreetBets, beating such tech giants as Apple, Tesla and Alibaba according to SwaggyStocks, a website that we first profiled months ago as the best tracker of popular symbols in the forum.
According to the WSJ, recent posts on WallStreetBets - who may or may not have read our extensive coverage here - have put forward bullish arguments in favor of uranium prices and related mining stocks, complete with the forum's typical mix of memes and humor. One post on the site last week pondered whether there was "A GME Like Opportunity In Uranium?" (which oddly enough references us).
The WallStreetBets activity follows a sharp price rise for the physical metal used largely to fuel nuclear power plants. New York-traded uranium futures have surged over 30% so far this quarter to $42.40 a pound, which as detailed extensively last week, have been the direct result of the Sprott Physical Uranium Trust, which - let's not mince our words - is hoping to create a Hunt Brothers' like squeeze in uranium.
The fund, which trades on the Toronto Stock Exchange, has amassed almost 25 million pounds of the metal since it was first launched in July and bought 850,000 pounds on one day alone last week, according to Sprott. The total mined supply of uranium was roughly 120 million pounds in 2019, according to the World Nuclear Association.
Investors are also betting that demand for the metal will rise amid a global shift toward less carbon-intensive sources of energy. Governments including the U.S. and China have pushed for a role for nuclear power in global efforts to mitigate climate change, helping to broaden the appeal of uranium among investors, said Mr. Liebenberg.
"The uranium market is quite niche and small but the interest I have seen from generalist investors has been much broader than I used to see in the past," said Mr. Liebenberg.
A page on Reddit called UraniumSqueeze has attracted more than 13,000 members since it was created in February. It describes itself as "dedicated to all the investors and traders passionate about the uranium market."
And with the Biden admin hoping to make coal power extinct by 2030 (see "Democrats’ Energy Plan Will Kill U.S. Coal by 2030, Miners Say"), expect much more upside not only thanks to fundamentals which make nuclear power the only game in town, but now that the apes are pushing the entire sector higher as the latest flow data confirms...
Total melt-up in Sprott's physical uranium trust (which $SRUUF is part of) which filed for and is awaiting new shares to issue. Some of this is uranium price and some is the premium (like a CEF). pic.twitter.com/MG6Kf0kUqB— Eric Balchunas (@EricBalchunas) September 13, 2021