Reassessing Uranium Miners Risk/Reward
Digging into some uranium miners antics and do other sectors now offer more upside?
I'll let a meme set the mood for this piece.
Yes, I will go over Boss Energy, but first, I'll start from uranium's top-down view, as that's why I haven't left this shower room a long time ago.
The thesis was always straightforward;
Watching supply destruction occur in uranium is like counting cards in blackjack.
You may not be able to predict the future, but you can have a damn good idea of how much the odds are shifting in your favour over time since it's one of the only sectors you can work out demand (operating reactors + reactors under construction).
The demand side of the equation is unique, as I've explained here.
I don't need the Net Zero demand projections or even the high demand case; I just want to see a clear path for supply to meet base case demand. Currently, it's falling nearly a quarter short, and we don't yet have miners pretending they can fill the gap.
“By 2030, which is tomorrow in uranium years, 23% of required pounds have not been built, permitted, financed. The mines don't exist."
-Mike Alkin
Kazatomprom isn't going to help pug the gap. In fact, the Sulfuric acid plant required to get Kazatomprom back on is now delayed until 2027, meaning they likely won't get the required acid until 2028 and production until 2029.
To put this into context, Kazatomprom's lowered guidance will amount to all expected new mine production for 2024 and 2025 (of which the majority will miss guidance anyway).
H/T to @Siev140277 and @mineralstocks for the table (red is me marking delays i.e. GLO and GXU sure as hell aren’t going to be producing 7mlbs in 2026).
Mining is tough.
You can get screwed by geopolitical risk, as has been the case in Niger with Global Atomic and GoviEx.
You can be screwed by management knowing they're sitting on a great resource so they can get away with regular dumb shit.
Exhibit number one.
Nexgen is still working through permitting with zero cashflow until 2028 (at the earliest) yet figured sponsoring F1, buying pounds for no good reason and running crazy G&A are justified.
Or you can get screwed by miners being miners and lighting shareholder money on fire, of which Peninsula Energy is currently in first place. It takes talent to still be trading at COVID lows, having diluted shareholders 8x, while uranium spot tripled (Corgi had me crying with this one).
Yet, as much as I hate junior miners, there is still a lot of upside as money flows into the sector to close that supply-demand gap. It's exactly what we are starting to see play out when you look at the YTD performance of SPUT vs URNM and URNJ.
There needs to be sufficient incentive and resulting capital flows into the space to fix the supply problem. It's not the 2006 situation with the market in surplus for the foreseeable future (the price can't spike, and producers sign sufficient term contracts to fore-fill utility requirements as the mines don't exist).
Knowing this is great, but as my mentor Brad once explained,
"It's not the view that matters, but the application of the view."
My application of the view with uranium has been hit and miss.
Global Atomic was a kick in the nuts, but ultimately, I still think it gets into production as I went over here.
Even the miners that have been executing can't help themselves, which brings me to Boss Energy and the recent sales by the CEO and two directors.
Boss Energy is a substantial position for me, having allocated 6% back in 2020/21.