What’s more likely… the lights going out or the price
of a commodity rising in order to keep the power on?
I think one of the safest bets we can make over the next 1 to 3 years is a rising uranium price. It comes down to the most basic of economics, and the most important one, too: energy. 1 out of 5 homes in the United States is powered by nuclear energy.
Globally, there are 448 reactors operating and 88 under construction!
The demand for uranium is like no other. And currently, no producer on the planet is covering their all-in production costs at the current spot price. The opportunity to position ourselves now (at the start of an uptrend) is better than I’ve ever seen.
Take a look at the Global X Uranium ETF. It literally spent the entire year of 2016 forming a bottom, and since its low, it has been making higher highs and higher lows.
All this is going on when uranium is at an inflection point, where we have miners all around the world cutting production due to low prices. The brutal bear market -- perhaps worse than any we’ve seen in decades for any commodity -- saw Kazakhstan, the leading producer of uranium, announce that they would also be forced to cut production by 10% over the next year.Last week, Cameco, the largest-publicly traded producer, said the workforce at their top operations would have to be cut by approximately 10%. We believe that over the next 1-3 years, the uranium trade will likely be the safest and one of the most profitable.
Supply is being reduced due to the bear market, but the fundamentals have never been better, with massive global demand for clean and sustainable energy. Our top pick for the sector, is Uranium Energy Corp. (UEC).
This a North American uranium producer who, very early on in the bear market, decided to slow down, shutting down production at their Texas operations. I spoke to their CEO, Amir Adnani, who said they are ready for production but refuse to sell uranium at a loss like many of the other uranium producers. It’s simply due to the fact that they don’t have to – UEC’s production is not like a traditional mining operation, with dynamite, large trucks hauling rocks, or tunnels.
Think of it more like a processing facility, with water pipes instead. With in-situ recovery (ISR), they can literally turn it off and on, and their Hobson facility in Texas is fully permitted and ready for a higher uranium price.
Since hitting $7 in 2010, UEC has more than doubled its in-ground resources, achieved production, and further advanced two additional flagship projects in Texas.
It’s also brought onboard former secretary Spencer Abraham as its Chief Executive Chairman. With Texas operations, they are in no doubt well known to the incoming energy secretary, who was one of the most nuclear-friendly energy governors in the U.S. President Trump is already looking to include new reactors in the U.S. as part of his infrastructure and energy independence plan.
The upside is enormous for this sector, because it needs to rise. This clean energy is powering hundreds of millions of homes right now around the world.
Last week, we spoke to former energy secretary, Spencer Abraham. One of the boards he sits on is with a $52 billion energy company, but he also chose to become the executive chairman of UEC, who has a $200 million market cap.
When asked why, he said that one of the big concerns when he was Secretary of Energy was America’s dependence on foreign uranium production. In case of emergency, the U.S. simply doesn’t have domestic capability.
The U.S. is the largest consumer of uranium, but it imports over 90% of this crucial commodity. With Trump in office, Mr. Abraham said he believes there will be a very solid push for nuclear energy, with both natural market forces and government working to deliver clean energy (and jobs) to the economy.
To listen to our interview with Secretary Abraham, click here.
Consider taking a long-term position in Uranium Energy Corp. (UEC) up to $2.25.
I have no doubt that as the price of uranium turns, UEC will be the go-to stock for investors.
Share Disclosure: I am long UEC
Editor’s Note: Did you know that the Fukushima nuclear power plant wasn’t the closest reactor to the the earthquake’s epicenter? I didn’t know that, either. Our good friend and fellow UEC shareholder, Marin Katusa, recently informed me of this. Marin has been asked to be the keynote speaker at energy conferences around the world, and he is a real expert who backs his findings with his own investment dollars.
Although the town of Onagawa was destroyed by the tsunami, the 3 nuclear reactors in the area all withstood the earthquake without any issues. What Marin told me next was stunning: unlike in Fukushima, where the locals were evacuating, in Onagawa, they fled to the nuclear reactors for safety! Built properly and with a trained staff, a nuclear power plant is the safest place on earth.