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Why Uranium? Why Now?

Capitalist Exploits's Photo
by Capitalist Exploits
Tuesday, Apr 30, 2024 - 12:00

ON URANIUM

One of our subscribers (a gent we had the fortune of meeting in person in Dubai a few weeks ago) sent this through to me. It is a great breakdown of the situation in the uranium market:

Hi Chris

If you have the time, I have some very nice addons for the next newsletter regarding uranium.

I came across this gem on twitter:

Here is the TLDR version: this table contains the capacity addons over the next years (best-case scenario) of current projects (research by the tweeter):

With this, if we calculate with current building projects (China alone builds some 85 reactors at the moment) we come to this net balance till 2035

Doesn’t look to me like the uranium thesis is dead yet…

A flashback — let’s say you bought Cameco back in 2000 at the height of the TMT bubble (March 24). Somehow you had a brilliant insight that uranium would be a big winner over the coming months/years. Fast forward four years and Cameco was up some 330%. You may have been thinking of getting out and not pushing your luck (not too dissimilar to how many folks are currently feeling about the magnificent run in uranium miners over the last few years).

Now, let’s take Cameco’s performance from March 2004 to March 2007 (below). It ended up going up another 300%. In other words, just when you got the jitters of being up too much in the trade, you were only halfway through the cycle.

We suspect that we are closer to halfway through the current bull market in uranium rather than closer to the end of the cycle.

We sincerely believe that the greatest risk to most (if not all) of these thematic trades we are invested in right now (uranium, offshore oil services, gold, tankers, etc.) is getting out too early. From 2016 to 2022 (yes, six years) we did the hard yards, and now we are seeing the fruits for our toil. Let the good times roll!

Incidentally, one other thing to note in the first Cameco chart above — come March 2003, the S&P 500 was down some 45%, whereas Cameco was up 150%.

And how did Cameco perform in the lead up to March 2000? From 1995 to 2000 it was down some 44%. From March 1996 to 2000 it was down some 76%. Either way, by 2000 it was regarded as “toxic waste” by investors (as with all uranium miners), and the rest is an enlightening history.

Moral of the story? There’s a handful, actually:

  • Even in the face of a nasty bear market you can make good money by buying “toxic waste.”
  • The more ferocious the bear market the longer the duration and magnitude of the bull market that follows.
  • Don’t be too quick to take profits.

Of course, it is all so easy being a hindsight genius!

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