By Justin Spittler, editor, Casey Daily Dispatch
The “smart money” is betting big on uranium.
Smart money refers to big-time institutional investors. They’re not the kind of people you want to bet against… especially when they’re “backing up the truck” on an asset.
And that’s exactly what’s happening in the uranium market.
You see, a group of bankers are getting ready to launch a new company with one purpose: to gobble up cheap uranium.
The company is called “Yellow Cake,” named after the raw form of the commodity. And its plan is to buy 8.1 million pounds of uranium.
The deal is worth $170 million. The uranium will come from Kazakhstan-based Kazatomprom, the world’s largest uranium producer. The deal represents about 25% of the company’s annual production… and about 5% of global marketed production.
• To fund this mammoth purchase, Yellow Cake will hold an initial public offering (IPO)…
And the goal will be to raise between $160 million and $200 million. That will make it one of the largest fundraising events to happen in the junior market in years.
But that’s just the beginning.
Yellow Cake has also negotiated plans to purchase an additional $100 million of uranium each year for the next nine years.
In other words, this company plans to buy more than $1 billion worth of uranium over the next decade.
This is a big deal… and yet another reason to consider speculating on uranium.
In a minute, I’ll show you an easy way to do this. But you should first understand something important.
• Yellow Cake has no intention of ever using this uranium…
It’s not going to burn it for power. It’s not going to build bombs with it, either.
Instead, it’s going to buy this uranium… and sit on it.
The people behind Yellow Cake believe uranium is “structurally mispriced.” Here’s a quote from Yellow Cake’s CEO Andre Liebenberg:
Due to an exceptional confluence of events, uranium is one of the few commodities yet to recover from the recent commodities bear market.
We believe that uranium is fundamentally and structurally mispriced in the current market, and on a historical basis.
Regular readers know why Liebenberg thinks this. In short, the price of uranium is down 85% since 2007.
It’s so low that about 75% of the world’s uranium is being produced at a loss.
But Yellow Cake isn’t just loading up on uranium because it’s absurdly cheap.
• Uranium appears to be on the verge of a major supply crunch…
Here’s what Yellow Cake wrote in a recent press release:
A decade of declining uranium prices has seen little investment in uranium mining, resulting in a projected supply deficit absent material increases in the uranium price…
Even with a material increase in the uranium price, it may take years before new sources of uranium are ready to be mined, due to delays associated with permitting for exploration and development of uranium mines…
The supply gap is currently being covered by secondary supply, largely from enrichment providers underfeeding. However, secondary supplies have declined, and are expected to continue to decline and may not be sufficient to fill the supply deficit while new mines are developed.
And just so you know…
• The people behind Yellow Cake are the real deal…
Peter Bacchus, the mastermind behind the project, has more than two decades of experience as a leading global mergers & acquisitions (M&A) adviser.
Currently, he heads Bacchus Capital Advisers, a new independent corporate finance and M&A platform. He also previously served as Global Head of Mining and Metals at Morgan Stanley and European Head of Investment Banking at Jefferies Group.
Liebenberg is no slouch, either. He has more than two decades of experience in equity and investment banking. Most recently, he served as Chief Financial Officer of QKR Corporation, a global mining company.
In short, these guys are heavyweights in the investment and mining industries. But they’re not the only ones getting ready to bet big on uranium.
• Tribeca Investment Partners is preparing to launch a new uranium fund, too…
Tribeca is an Australian fund manager. It oversees about $2.5 billion.
The new fund is looking to raise $100 million. And according to The Australian Financial Review, Tribeca is doing this because it believes the price of uranium could more than double over the next five years.
Again, these people know what they’re talking about. And right now, they’re telling the world that uranium won’t stay cheap for long.
This isn’t something you want to ignore as a speculator. So, consider speculating on uranium if you haven’t yet.
The safest way to do this is with the Global X Uranium ETF (URA). It allows you to bet on a basket of uranium stocks, which is less risky than buying individual stocks.
Just understand that uranium stocks are extremely volatile.
Blue-chip uranium stocks can swing 5% or more in day. Junior uranium stocks can move 20% or more.
If you can’t handle that volatility, you should stay on the sidelines. And if you’re willing to speculate, don’t bet more money than you can afford to lose. Use stop losses. And you may even want to trim your positions once you’re sitting on big profits.
June 29, 2018
P.S. If you want specific uranium stocks to profit from, I highly recommend you check out Crisis Investing editor Nick Giambruno’s model portfolio. Nick is also bullish on the uranium sector today and has narrowed down the top plays to start multiplying your money. You can access these names—and all of Nick’s research—with a subscription to Crisis Investing.
Today, a reader appreciates our recent Conversations with Casey: “Doug Casey on the Space Force”…
Doug, you were terrific and as I read this article I laughed like hell when you quoted General Turgidson [G C Scott]—”We cannot allow a mineshaft gap!” I’ve watched it at least 10 times or more. But you hit it on the head. We buy our launch rockets from Russia and we are at a form of war with them now. Maybe that’s why Trump wants a summit with Putin?
If you have any questions or suggestions for the Dispatch, send them to us right here.
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