Justin’s note: Today, in-house commodities expert Dave Forest shares the details behind his Casey Cost Curve system… and the two key metals it’s flashing buy signals on today.
As you’ll see, these are two metals to own in addition to gold in the months ahead. And the window to get in is quickly closing…
Justin: Dave, thank you for taking the time to speak with me again. During our last conversation, you mentioned how you see a financial crisis on the horizon. You also mentioned how gold is the number one metal to own heading into, during, and after a crash.
Is that the only commodity you like these days?
Dave: Right, so we’re kind of in “protective mode” right now. But that doesn’t mean that we’re avoiding all other commodities.
I say this because two commodities really stand out right now in our Casey Cost Curve system. Simply put, Casey Cost Curves tell us how much it costs for mines around the world to produce a commodity. When commodity prices are near or below the cost curve, it’s a buy signal… meaning that producers are making little or no profit – and thus prices need to rise in order to preserve supply.
Justin: And what two commodities stand out?
Dave: Platinum and uranium… but for different reasons. So I’ll start with platinum.
Right now, more than half of the platinum mines in the world aren’t profitable. It’s very rare for a metal’s price to be so depressed that half the industry is not making money. But it’s because about 70% of the world’s platinum comes from South Africa.
And South Africa, as you know, is having all kinds of problems. It’s plagued by labor issues, high-power costs, and government legislation.
South Africa’s mines are also generally old and exceptionally deep (up to a few kilometers in some cases). Not only that, mining costs here are on the rise – at a time when platinum prices are at a historic low.
When you add it all up, it’s basically a powder keg for one of the world’s key metals.
Justin: A recipe for higher prices?
We have a world-class platinum company in our International Speculator portfolio.
I’m also looking to add more platinum positions. The challenge is that there aren’t very many platinum companies on Earth, and most are in South Africa.
The two other major platinum-producing countries are Russia and Zimbabwe. And neither is an A-grade investment destination, either.
So it’s not exactly easy to speculate on platinum. But we’re keeping a close eye on the situation.
Justin: What about uranium? What makes it stand out?
Dave: So uranium is also pretty attractive on the cost curve.
Like platinum, most uranium companies are losing money. Even Cameco, the world’s largest public uranium producer, has been shutting down mines due to low prices. Not only that, it’s shutting down some of the world’s lowest-cost mines, like McArthur River.
When an industry’s lowest-cost mines are shutting down due to low prices, you know the situation is pretty dire. That makes uranium interesting.
We’ve kept our uranium positions for that reason… and we’ve actually added a few more, including one of the only uranium producers based in the U.S. We think it will do really well.
Justin: And what if there’s a financial crisis? How should uranium fare?
Dave: Uranium demand is pretty steady, regardless of the financial environment. After all, the lights have to stay on no matter what, and since uranium powers nuclear plants – which supply around 20% of America’s energy – there’s not a lot of room to lower that demand.
It’s also worth mentioning that uranium has less of a speculative element than other commodities, like copper. Because of this, uranium is less vulnerable to a financial correction.
Justin: What do you mean by that?
Dave: I’m specifically referring to its price…
With a highly liquid metal like copper, you get a lot of people speculating on it. A lot of people buy and sell paper futures on it. There’s a lot of that with gold, too. Even iron ore now has a lot of speculative trading. But uranium has very little speculative buying.
Sure, there’s a uranium futures market. But it’s not a very big market. This is important because a lot of people will dump copper futures when there’s a financial crisis. That won’t happen with uranium.
Justin: What about uranium stocks? Aren’t they some of the most speculative assets on the planet?
Dave: Yes. Uranium exploration stocks have a huge speculative element.
If the uranium price goes up, they can catch fire. Paladin, for example, went from one cent in 2003 to $9.57 in 2007. It was incredible… a 95,600% gain in less than four years.
There was also a lot of speculation in physical uranium when the market picked up. A bunch of people created funds to buy physical uranium when uranium moved up from $20 to $40.
But the uranium market has been depressed for so long that all of that speculation has evaporated.
Of course, that could all come back if the market heats up again. And that would be great. It would help propel things higher.
But we don’t have it right now. So we’re not going to see speculators dump uranium en masse if a financial crisis hits tomorrow.
Justin: That’s interesting.
I know a lot of people understand the upside potential of uranium. But few probably realize that it has a lot less downside than most commodities… particularly in the event of a major financial crisis.
Dave: Correct. Speaking of uranium’s potential, we actually just wrote an entire issue on uranium in International Speculator. [Subscribers can access that issue here.]
We believe that the nuclear industry has reached an inflection point. Just look at what’s happened recently.
On March 22, Energy Secretary Rick Perry unveiled a $3.7 billion funding package to complete the last remaining nuclear plants under construction in the U.S. Commissioning is expected in 2021 and 2022, making these America’s first nuclear starts in 25 years.
That’s big news. But an even bigger announcement came for nuclear, just a week later.
On April 1, reports emerged that China is about to approve construction of new reactors. Papers quoted the head of China’s National Nuclear Safety Administration, Liu Hua, who said, “China will start building new nuclear projects this year.”
This would be the first approval of new reactors in China in three years – and Liu’s comments suggest building is going to restart imminently.
That’s great news for uranium producers, because China has been the biggest driver of global reactor buildouts this decade. In fact, Chinese-installed nuclear capacity has increased more than 20-fold since 1990.
China’s reactor builds are the biggest factor affecting global uranium demand. Even with the slowdown in reactor construction recently, Chinese projects still account for 25% of the nuclear capacity being built worldwide.
China has lots of nuclear projects it could choose to activate. Planned and proposed projects across the country would add 162,476 megawatts electric of capacity. That would triple China’s overall nuclear generation.
And several recent moves from China’s uranium companies support a coming surge.
So uranium is attractive from both fundamental and sentimental perspectives. For the longest time, “nuclear” was seen as a bad word. But it’s now being embraced, even seen as a solution by the climate change community. It’s quite interesting.
Justin: Great stuff, Dave. Sounds like a big money-making opportunity. Thanks for sharing.
Dave: My pleasure.
Justin’s note: Dave says we’re about to witness the birth of a brand-new, $9.6 billion market.
And today, you can get in on the ground floor.
If his projections are correct, you’ll be able to turn a small stake into $50,000 – maybe more.
In this short video, he explains everything you need to know about this opportunity… including how to position yourself for the biggest gains possible.
For reasons you’ll soon discover, this opportunity won’t last long… So please pay close attention.
Will you be taking advantage of this money-making opportunity? Are you invested in commodities today? Let us know at [email protected].
You’re invited to spend time with your favorite investing masterminds in southern California… the only time this year that all of Casey Research’s gurus will be together on one stage…
As a Dispatch reader, you’ve got an exclusive invitation to join us at the second annual Legacy Investment Summit on September 23-25.
Join the smartest minds in finance – like the legendary Doug Casey, former hedge fund manager Teeka Tiwari, master trader Jeff Clark, and angel investor Jeff Brown – for their exclusive, in-person insights.
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