It has been two weeks since my latest uranium update and it has been a very eventful time. We had the announcement of China planning to build 150 reactors last week. This is massive news that will have a huge impact on demand going forward. Late this week the sector got more somber news with the Clearwater River Dene Nation serving notice on the uranium industry regarding impacts of uranium mines and exploration in Saskatchewan Canada. This has led to some heated discussions and a lot of opinions.
The CRDN community has:
grave concerns about the potential impacts and risks posed by an increasing number of uranium mining and milling projects and exploration activities occurring within its Traditional Lands.newswire.ca
This is a serious issue and should not be swept under the rug. The mining industry has a long history of not treating all the different stakeholders fairly. (Workers, the environment or investors etc). In Canada it is not unusual for mines taking 10-20-30 years to get into production. There are a lot of environmental permits and social approvals needed before you can start production. I wrote about my allocation to Canadian companies on 14. March 2021, and permitting is a big reason why it was on the smaller side compared to other jurisdictions.
Challenges in terms of permitting in Canada have never been a secret. Compared to grades, and quality of assets, the Canadian companies have been trading at a discount compared to companies in other jurisdictions. Episodes like this proves that a discount might be warranted. Social licence being an important part of the mix. I am also certain that some companies are better than others in this area, but I do not want to touch the specific First Nations case here because I do not have all the facts. This is a reminder of how important this is. (In Norway we just had a Supreme Court ruling that a wind-park has to be taken down because it was in violation of indigenous peoples’ rights).
Going over some of my earlier thinking
I have read over some of my older articles and I am happy to say that I know more today than what I did a year, or six months ago.
One thing I firmly believe in is that the stock market will very often turn before the general market. When uranium companies rose rapidly at the end of 2020 there was no price movement to speak of in the spot or long term market. Still the equities were anticipating the sector would improve. I mentioned this in one of my posts in July 2021:
Even the notion that we are in a bull market is still contested by some. The spot is not above $35 yet, and one can say that we still do not have confirmation. I think that by waiting for confirmation, you risk the market getting away from you. If you only place chips on the table when you know the outcome in advance, you will have to settle for a lower return.
I think I was right about that one. We can compare the change in equities over the last year compared to the move in spot price. The move in the spot price did not really start before the end of August. If we compare this to three companies: Fission Uranium, Energy Fuels and Global Atomic, they went up about 88% (CA$0,26 to CA$0,49), 174% ($1,74 to $4,77) and 275% (CA$0,64 to CA$2,4) before the spot in earnest started to move from $30 to $47. You miss out on big gains waiting for price confirmation.
Equities have continued climbing up afterwards, but people who have waited for spot price to start running are a lap behind.
For me the easy part of this investment is over. Holding conviction when everything is horrible is easy for contrarians. The minute things start looking better, it gets harder. Contrarians want to exit the party when other people arrive. You do not want to leave too early, and let everyone else have all the fun.
I have dipped my toe in the more mainstream crowd this week. I am happy to report that no one I talked to had heard about China and their 150 planned nuclear power plants. (They had only heard about them not attending COP26 in Glasgow). I therefore see the most eager guests are arriving, but we still have a long way to go.