Before anything else, I have to touch base on uranium again.
Let me start with the conclusion: buy.
If you are not positioned, consider that uranium has gone from US$30 per lb. three weeks ago to US$42.50 per lb. today. The gains are happening because the Sprott Physical Uranium Trust is buying uranium in the spot market.
I talked about this two weeks ago. At that point, the new Sprott fund had been active for a week and the uranium price was up a few dollars.
Two weeks later, two important things have happened. First, we’ve been able to watch Sprott deploy its capital and deploy it has. No one knew how quickly it would raise funds and buy physical but, using the chart below borrowed from Katusa Research (thanks to Marin and his team) we can see they are going big.
If you recall, the trust is raising funds through At The Market financing, which is a mechanism that lets the company sell new shares into the market at market price. So it’s like normal financing, but one that stays open and can raise as much as the company wants, up to the max stipulated in the ATM filing, and at whatever pace the company and the market choose.
That’s the first thing we learned. Then today we learned a second, very important thing: the Sprott Physical Uranium Trust managed to get rapid approval to increase its ATM max from US$300 million to US$1.3 billion.
If US$230 million of buying in the spot market pushed the uranium spot price from US$30 to US$42.50 per lb., where is US$1.3 billion of buying going to push it?!?
I don’t know the answer, but I am pretty sure we are in for a crazy uranium ride over the next while. It might last a few months, just as long as it takes Sprott to deploy its now-massive pool of capital. Or it might last a few years if a rapidly rising spot price has the effect Sprott is aiming for: spurring utilities into signing long-term supply contracts at prices above spot, for fear of getting left out.
If that happens – and I think odds are pretty high, boosted by $1.3 billion in buying – then we will have a true uranium bull market. And uranium bull markets put gold bull markets to shame.
They lift uranium stocks tenfold at a minimum, hundreds of fold (is that how to say that?!?) for the best.
Utilities get scared and pile into the market, jacking the price. Then stocks go wild. The reason is that there are so few uranium stocks out there. When investors get interested, they have only a few places to place their bets and that focused attention lifts equities through the roof.
It’s not going to hurt that WallStreetBets are also leaning into uranium.
To see my picks, I have uranium exposure through several stocks in my portfolio, and I’m happy to provide guidance in this bull market – subscribe today for details.