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 thank you I'm Charlotte McLeod with the investing News Network and here today with me is John champaglia CEO of Sprott Asset Management thank you so much for joining me online today it's great to see you again nice to be back really nice to be picking up with you and I realized when I was getting ready for this interview we actually haven't talked for more than six months about eight months since our last interview so so many things have happened in the uranium sector since then I wondered if

we could just Begin by having you pick out any big highlights from that time period maybe talk a little bit about sentiment as well in the sector yeah actually I remember our last uh call very clearly because I was actually in Saskatoon and I was on my way to uh visit one of chemicals mines in Athabasca Basin so it's pretty hard not to forget about that that experience and then chemical obviously has been uh very front and center in terms of a lot of the the news flow but just uh going back

to you know sentiment I think sentiment is obviously very important it tends to have a very large role in the day-to-day flow of markets and right now I think uranium is kind of caught in the backdrop of a very bullish a very bullish scenario in terms of the fundamentals but you know the backdrop that's being caught in is you know banking failures in the United States everyone's still waiting for for some kind of a pivot or a pause with Federal Reserve policy and unfortunately the last you know I would say 12 months now

uranium has been caught in in that Whirlpool so it's very frustrating to investors because they see the contract book of future uranium deliveries continue to grow by a huge amount last year we saw the largest amount of uranium purchased by Utilities in the last 10 years and that's a great signal to us that utilities are actually restocking inventories because they're running them down and I think more importantly they're thinking more positively about their operations and the government support that they're

receiving in many countries and obviously the potential risks that that I would say are still lingering the market with respect to the threat of sanctions against Russia different Services potential supplies disruptions uh uh coming from you know places like Kazakhstan which unfortunately have historically shipped uh most of the uranium through Russia so you know it's it's unfortunate that we're still we're still caught in this negative macro backdrop at the uranium story Still Remains very polish and the price of

uranium has been incredibly resilient relative to other Commodities which have sold off pretty hard in the last few months on recessionary risks okay so we have really a lot of things that we can follow through just from what you've said there maybe where we will stick to begin with is with the investor side because I think you hit the nail on the head with what investors are feeling right now they're looking at the continued positive developments in the sector and they're wondering why

aren't their stocks moving so for you it sounds like that relates back to that macro backdrop which is Weighing on pretty much everything right now so do we need to see that improve before we see the stocks perhaps start to move yeah I think it's critical I mean we have been in very a very range-bound market for a while now it's just like people don't know which way the markets are going to break whether they're going to break to the upside or whether they're going to break

down uh and and and when you have that kind of decision tree scenario I think people's reaction and I talked to many institutions around the world they're sitting on the sidelines uh they're just they just don't want to make any big portfolio decisions given the uncertain path that they see in many different Equity markets I think the other proof point that we uh pay very close attention to is the inflows that we see in Money Market funds I mean think about a year ago before the FED

started tightening interest rates you know you probably got a few basis points per year of interest in a money market fund now people are getting four and a half five percent in Money Market funds uh which doesn't sound a lot in a in a robust Market environment but in an environment of a lot of uncertainty people are grabbing the five percent risk-free asset and we've seen you know upwards of five trillion dollars parked in the U.S money market funds alone and I think that there is a lot of money

sitting on the sidelines whether it's individual retail investors or very large large institutions they're all waiting for signals for some kind of pathway forward in terms of which way is this Market going are we going to have more bank failures and a kind of contagion effect really uh you know put pressure on Equity markets or or is this more of an isolated situation right and I think now is probably a good time to get an update from you on the Sprott physically uranium trust which I think a lot of people look at as a bit

of a Bellwether on the sector so continuing to add pounds although at a slower rate than it first started out with of course I believe around 61.7 million pounds is the level it's at right now so any details that you can share there that might help investors understand what's going on in the market yeah so that the trust had a very busy month of January uh as expectations of lower interest rates really pushed a lot of markets and commodity prices higher and then those expectations have turned

South in the last few months and and many commodity markets uh have sold off the price of uranium believe it or not over the last few months has actually gone up that I think it's one of the few Commodities that we follow that you can say it's up on the year now the trust is actually trading at a fairly wide discount to us that asset value and again this is a function of this this General macro kind of risk off sentiment right now with financial investors so you have you know you have n utilities

that are very concerned about buying enough uranium um and and been pushing the price up around five six dollars per pound so far this year yet the trust is trading at any discount because it's a reflection of where Market sentiment is amongst Financial intermediary and investors and I think there's a real disconnect between the two so you know it's something that we think will will correct over time and and the fundamentals will eventually cut you know catch up um to the the way spot is is trading

right now but we know we've been definitely a lot more quiet in the last few months we've not not been buying uranium who's been buying uranium it's mostly been utilities which you know you would expect them to be the single largest buyer of uranium because they're the end user but we've also seen some producers come into the market from time to time we'll buy in the spot market and you know just a few days ago on Friday on the recent uh chemical earnings call you know they they

announced that they need to buy several million pounds of uranium in the spot Market in 2023 to kind of backfill some of their their inventory positions so where we we see utilities back in the spot Margaret we see some producers buying in the spot market and that's definitely helped underpin the price of uranium this year which is up about five to six dollars a pound right and let's talk a little bit more about utilities because people are always interested to hear what they're doing it's one of the most opaque parts

of the market that maybe your average investor can't see so what are we seeing there we know that they're buying you've been speaking about that to what extent you know I imagine that they still have lots more buying to do even if they have been buying so can you situate Us in that context yeah it's it's a really important point because obviously the utilities require about 180 million pounds of uranium each and every year so they obviously have significant inventories but every month

you're basically running your inventory down if you're not procuring I think utilities are finally starting to figure out that the the prospects for Uranium look much more bullish and the prospects for nuclear energy remain much more bullish than than you know the situation two years ago so they you know you see these utilities with nuclear facilities do the incredible while they're they're making a lot of money again they're receiving government support and different Financial incentives and

they're getting extensions you know in terms of operating Life Extensions and all of that will obviously prompt them to secure more uranium for the future but it's a little bit mixed in our experience some utilities are being more aggressive than others in terms of reloading their inventory positions and procuring and others have been a little bit slower the other wild card in all of this is obviously the Potential Threat of sanctions and a couple weeks ago in The Hague there was a nuclear fuel uh Supply

conference that happened and I think the takeaway from that conference was the market is still in a very tight supplied position that uh there is increasing pressure growing utilities to move away from Russia as a supplier you know we don't think new Agreements are being are being signed between Russia and Western utilities but you know they're clearly taking delivery of Legacy contracts and I think governments a number of them in the G7 clearly signal that they want that to stop over time and that's going

to that's going to require a lot more capacity in the west not just uranium mining but uh conversion enrichment steps as well along the fuel chain cycle one more note on the utilities so you had mentioned we got camaco's latest results recently and there's a line in there where they send something along the lines of they want to be more selective when they're signing these contracts with utilities which I found interesting and I wondered if you could shed some light on that because we've

heard for so long that we need to have utilities come back into the market and buy and that's what's going to start driving the uranium Market or one of the things now it sounds like maybe the companies are in the driver's seat a little bit more so what are your thoughts there yeah well if you think where we were two years ago uh in in the contract negotiations between utilities and uranium producers I mean the the balance of power was was clearly skewed to the utilities you know the price was

basically stuck at twenty dollars a pound uh there was a large Supply overhang uh and there was no Catalyst uh that that that you know the utilities could could see in front of them in terms of any kind of a ship back to nuclear energy so there was no urgency and obviously when you have years and years of low commodity prices and abundant Supply you know you form this expectation your head that's just going to continue on forever you know it's just the trend continues obviously the world's changed dramatically in the last

two years energy transition is a real uh secular driver in terms of driving uh countries and economies to to Net Zero we think nuclear energy plays a big part in that transition government's a popular barely shifted their their preference app to nuclear energy after basically ignoring it for a very long time we look at all the different uh public sentiment and support surveys that happen around the world and and support for nuclear energy has really shifted unfortunately uh it's because

the youth you know the cost of their energy and and commodities and and you know uh utility bills have gone through the roof in the last year people are starting to rethink the role that that nuclear energy can play but I think I think everything has changed and when you have a sector that's been starved of capital for a very long time that is not invested in a lot of expiration development a lot of the projects from the last 10 years are finally starting to move forward uh after being on ice for many years it's

going to take time and you know there's still risks that there could be shortages over over time unless we bring new production on online so we've seen lots of Brownfield uh meaning uh existing mines that have been on care and maintenance finally come back online obviously chemical's been the big winner there in terms of restarting uh one of its Flagship mines we're seeing lots of other smaller companies restarting their operations this year and next year that that's really important because these

companies are filing it up Revenue coming in again and that's really important for the ecosystem but the big the big gap in Supply is still to be be solved meaning you know we need new minds not just restarting old ones that have been on terror maintenance we need some large-scale Minds to come online in the next you know let's call it six to ten years and those aren't going to be done with uranium at 53 or 54 dollars a pound those mines are going to need 70 or 80 or 90 or even 100 a pound to

actually become a reality and I think that's what most investors are betting on is that the incentive price will achieve a rate at which those Greenfield projects will finally come online and create a lot of value creation uh opportunities for some of these expiration companies and development companies that people are currently invested in I think that's definitely what a lot of people are waiting to see in this sector they want to see those news projects start to come online at the hopefully higher price level and I

want to ask a little bit more about price so I think companies that are signing contracts right now also want to make sure that they get the best value for the material that they're selling so I wondered if you could talk a little bit about how they structure their contracts it seems like usually there is now maybe more of a an attachment to the current spot price right when they sign these contracts so can you shed some light on that yeah I think I think you're raising a really good point and it kind of speaks

to how much the market has evolved these contracts are awfully often done bilaterally they're they're often confidential so you never really get the full picture which I find I find frustrating as well as many investors in the sector because they're very powerful price signals that everyone would love to have and and unfortunately we don't have that Clarity all the time but you know you would often hear utilities two years ago talk about being able to come to the spot Market buy as much material

as they wanted at whatever price they wanted they really were in the driver's seat that's changed when you talk when you you know when you mention this point about the some of the producers being selective about about contracts I mean that's basically code four we're not giving it away and this is a scarce resource and we're only going to sell this at the right price and what that means is basically you're going to be paying not fixed prices like the law last few years you're going to be paying

Market reference prices so that when we ultimately deliver this material to you whether it's two years or five or ten or twelve years forward you are going to pay whatever that market price is or it's going to be based on some kind of a mechanism with a cap and a floor and you know these caps are obviously moving much higher than than where the current spot price is because the reality is is the producers want to capture that price you know that price uh gain if it plays out in the market which many of them do so I

think the utilities are basically you know they've they've been conditioned I think to accept the fact that the Dynamics of the uranium Market that change a lot the days of these fixed price contracts are behind them and that they have to basically pay up if they want security supply and I think that's I think an important shift and it's really critical to the long-term health of the sector because you know if the if these uranium producers continue to get then all I'm going to

use the word shortchanged in terms of the the price they received for the material what incentive do they have in their stakeholders to continue to expand operations and replace depleted assets there is none and then you run the real rest that there is a you know permanent structural deficit in the market um and so I think you know the utilities understand that the producers are are partners and that they have to pay fair prices based on today's realities and inflation unfortunately is quite High

when you're talking about big Capital intensive projects um and I think the last point I would make is that the fuel costs for a for running a nuclear power plant are actually incredibly small relative to the fuel costs to produce the equivalent amount of energy let's say to Natural gas-fired power plant and so if you're a nuclear power plant I mean the price of uranium is really insignificant you really shouldn't care a whole lot you're more concerned about making sure you've got

fuel so that your plant is running all the time and you know I think it's a very different shift in mindset that that the utilities are finally getting around to to to shifting to very interesting and I think that's definitely really important as you've been seeing I want to look at demand at the country level because the last time we talked was before the winter and I think we still had the energy crisis in Europe really top of mind it seems like they managed to get through the winter

and that's faded from the headlines a little bit but I wanted to ask which countries you think are really doing a good job of bringing uranium into their energy mix and pushing it Forward even though we might not have that immediate immediate concern hanging over our heads yeah it's a good question I mean I think Europe was um saved by the weather last year and I think it's very dangerous to think you're gonna you're gonna be able to continue to rely on abnormally warm winter going forward so I would argue

that the crisis and the energy crisis in Europe is far from being solved um countries like Germany who have who have made the the poor decision to close their last three nuclear power plants the last two weeks is still burning an enormous amount of call and has a terrible carbon footprint relative to some of its neighbors but you know I think if you were to ask okay which countries have been the most Progressive in terms of pivoting back to nuclear energy I think United States I think gets first prize I mean the the

financial incentives the the open direct dialogic from the Department of energy and the Secretary of Energy it's it's abundantly clear that they want to be leaders in nuclear energy again particularly with Advanced Technologies um I think Canada's done a pretty good job I mean we don't have nuclear energy across the country but uh you know where I live in Ontario we've broken ground on the first small modular reactor but other countries have done pretty important u-turns with their energy

policies uh including uh France you know the UK South Korea and chat and excuse me um at Japan and then I would finish with China because China is really the growth story here and to a second second degree uh India China in India are probably going to build the most number of new large-scale power plants in the world over the next 20 to 30 years they're very focused on this technology they obviously have incredible energy needs and they also are largely dependent on coal today both countries so as they try

to wean themselves off a call yes they're doing it with wind and and solar but nuclear is really what's going to make a huge difference to them so I think China is going to beat everybody in terms of new builds and new capacity um you know China General nuclear in the last couple weeks stated that they are they are going to be part of a massive expansion of nuclear energy capacity in their country as they try to decarbonize so the next question that I want to ask is about uranium at at the global level changing

acceptance what are we going to see in terms of you know with the Russia Ukraine war we've seen countries recognizing the value of bringing their supply chains internally right and being more National but will we need to see more of a global working together effort in order to really make nuclear power work at a global level what are your thoughts there yeah I mean just just in the last couple weeks that you know the G7 made an announcement uh essentially reiterating commitment to each other and

in cooperation with respect to nuclear energy and fuel because they're all trying to basically wean off of Russia and they realize it's important to do this but it's going to take several years to to implement I think the wheels are in motion right now we in the United States for example in the this month we we have a major facility restarting called cumberdine and that's a conversion facility it's part of the nuclear fuel cycle and this is really an important step to basically reshore some

of these Services away from Russia and I you know I you know just going back to your point about changing public sentiment it's happening it's happening in Canada the United States the Sweden um I hope this new movie uh that's being aired right now by Oliver Stone that's very pro-nuclear helps to change some of the attitudes and and and misperceptions and misinformation that I think unfortunately people have with respect to nuclear energy because we do believe it is part of the solution

um it is a critical mineral it is being added to the critical mineral lists in several countries and uh we finally think it's getting their recognition it deserves do you have any final thoughts that you would share on uranium with the audience yeah I would say remain patient if you're invested in the sector I think sediment right now is Rock Bottom we look at a lot of different measurements and bronchers and we talk to a lot of people around the world I can tell you it is really washed out I don't think

sentiment has been this way in the equities the iranian-related equities for a long time particularly the Juniors and I'd be think the Juniors have really been beaten up here in this in this negative macro environment um The Producers obviously are are somewhat protected from from some of this just because they're they're further along in their in their life cycles but it's you know I think you have to stick to your conviction I think you have to stick to a longer term view it is a volatile sector will continue to

be but you know just uh keep the faith I would say and look for opportunities to dollar cost average if you're interested in the sector but you know I think the fundamentals are going to play out it may take longer than people originally thought but I think it is moving in the right direction well luckily you know I do think there are a lot of uranium investors out there who understand the story and know that they do need to be patient so hopefully they can hang on just a little bit longer thank you so much for being here

today to go over what's going on in the market this is really helpful thank you for having me of course and once again I'm Charlotte McLeod with the investing News Network and this is Joshua paleo a sprot asset management [Music]