The price of raw uranium, known as yellowcake, was boring for almost a decade from an investment perspective. One pound of this commodity essential to run a nuclear power plant was priced in the range of $20-$30. This is interesting as the average site-specific production cost was calculated as $31/pound (1). Besides this bad margin, companies that are digging for uranium suffer from the fact that 98% of the uranium needed by US utility companies are covered by long-term contracts.
However, recently there is coming fresh air into the whole story as you can see from the price chart below.
Source
The Sprott Physical Uranium Trust is aggressively buying physical uranium, since launching on July 19. The recent removal of 6 million pounds, worth $240 million is colliding with a reduced 2021 mine supply of about 125 million pounds. Covid-19 has temporarily suspended the production of uranium due to shortages of mine workers. Furthermore, the demand for uranium is expected to rise from about 162 to date toward 206 million pounds in 2030 and 292 in 2040 according to the World Nuclear Association (2). This is due to the fact that China, Russia and India are increasing their nuclear power generation in order to reduce emissions. Also, Japan which completely closed its facilities after Fukushima is starting to reactivate its nuclear power plants.
This all may lead to a perfect storm of price discovery on which financial investors are beginning to bet by buying into Sprott or associated mining firms that all saw substantial gains in the last week.
This is @no-advice for @spinvest-leo
Resources
(1) https://mining-report.de/wp-content/uploads/2017/06/MRG_1703_energy_source_uranium_lersow_170607.pdf
(2) https://world-nuclear.org/information-library/nuclear-fuel-cycle/uranium-resources/supply-of-uranium.aspx