How Important Is The Spot Price of Uranium?

Marin Katusa, Chief Energy Investment Strategist

Though the spot price of uranium has fallen to US$34.50/lb.—a far cry from the US$140/lb it fetched a few years prior—how important is the spot price of uranium? The answer: not as important as the long-term price. In fact, over six times more uranium is traded in long-term market prices than in the spot market price. Most investors in the commodity universe understand the spot price for metals. A simplified definition of the spot price is what the metal costs to buy or sell right now, minus the commissions and fees. Oil, for example, trades billions of dollars a day on a spot price. For copper producers, unless they are hedged, the spot price is the price that matters to them when they sell their production.

The Dubious Uranium Spot Market

I say dubious because less than 15% of the metal is actually traded on spot prices. In the uranium sector, there are two types of markets: the spot price (less than 15% of the market—and as low as 5%); and the long-term price (over 85%). Currently, the long-term price for uranium is over 50% higher than the spot price. The long-term uranium price is currently set at US$57 per pound, whereas the spot price as of this writing is US$34.50.

Since our uranium webinar on May 21, 2013, our top recommendation is up over 50% on millions of shares traded daily and a market-capitalization rise of almost US$100 million, even though the spot price of uranium has actually dropped by over 10%. I don't know of a major US gold producer that has popped over 50% during the recent drop in gold spot prices. It is clear, therefore, that we are experiencing the first phase of the next bull market in uranium right now. The publicly traded uranium companies are attracting the interest of some of the smartest investors in the business. Uranium is in a stealth bull market, where the commodity price is not attracting the mainstream media's attention to the sector, but the smart money is buying the right uranium explorers and producers to position themselves before the spot price catches up with the long-term price of uranium, which is a matter of "when" rather than a question of "if."

Do your portfolio a favor and watch the free webinar, where Rick Rule, Amir Adnani, Secretary Spencer Abraham, Lady Judge, and the Honorable Herb Dhaliwal all make impressive, logical arguments why uranium is so important moving forward. For those savvy investors who did watch our webinar and are sitting with a profit on the stocks we recommended in the webinar, we recommend you watch it again, to remind yourself that we are in the very early stages of the next phase of the uranium supercycle that will dwarf the previous uranium bull markets. As my friend David Galland taught me years ago, "fortune favors the bold"—so take an hour out of your House of Cards schedule and watch the uranium webinar, as I believe it will be the foundation for your "house of gold."

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Additional Links and Reads

Bakken Flaring Burns More than $100 Million a Month (Reuters)

This is a testament to the oversupply of natural gas in the United States. Natural-gas infrastructure still has to catch up with the boom in North Dakota; however, we expect producers will still concentrate on oil regardless of how much they promise regulators and environmentalists. Once we see natural-gas prices increase, then we will see producers monetizing it.

Iraq-Turkey Oil-Export Pipeline Expected Back in Operation 72 Hours After New Attack (Platts)

The pipeline connecting northern Iraq and Turkey is arguably one of the most attacked pipelines in the world. It is no secret that Kurdistan is one of the last areas in the world to host "elephant deposits," but it's also one of the most politically unstable areas of the world. The Kurdistan Regional Government continues to try gain independence from the central Iraq government, but it does not have the funds to build its own oil infrastructure. The entrance of the supermajors into the area may calm the situation somewhat, but the future still remains shaky.

Three Tons of Oil Spills in Siberia (Eurasia Review)

Greenpeace activists dedicate a lot of time to protesting in Canada, where the media is very open to giving them the limelight. More exposure means more donations, which means more money for what was once a sincere organization. Environmentalists may want to rethink their priorities, as it is not Canada which is destroying the Earth. Canada has the most stringent environmental policies in the world; Russia is not even close to matching them. Oil spills are merely forgotten, and policy makers do not care because it is still a very much developing country. But why protest in Russia when Canadian protests are much easier?

Jul 30, 2013
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