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 [Music] I'm Char cloud with investing news.com and here today with me is Justin Hune founder and publisher of uranium Insider thank you so much for being here great to have you good to see you again Charlotte thanks for having me again really good to be catch ing up with you and as usual we have some much to go through in terms of what's going on with the iranium market but I thought we could start a little bit simple and just take a quick look back at 2023 and how the year turned out how the

year turned out in terms of supply and demand what that balance or more correctly imbalance is looking like as we head into this New Year well 20123 had a pretty substantial deficit for Supply um I think that's going to shrink a little bit for 24 with the uh ramping back up of kico's MacArthur River mine which was on Caren maintenance for four years and they restarted that and got that up and running last year didn't quite hit their target but they didn't miss by that much at MacArthur and they expressed in their

Q4 call that they would uh they intend to ramp that up to its to the Mills full capacity which is 25 million pounds a year um which I think they'll achieve but it's going to take some time and it's going to take some investment but last year we were looking at somewhere between 130 to 135 million pounds of of primary production and approximately 180 million pounds of primary demand those numbers of course especially the demand number can be largely skewed based on Tail's assumptions for enrichment that's

a little bit of a complex topic but if we if we give it a relatively conservative Tales assumption for 2023 we're looking at right around 180 million pounds of demand so a very very large primary deficit between supply and demand of course there's both secondary Supply and secondary demand and some of the secondary Supply the primary source of that is enrichment underfeeding now in the West for ureno and orano which are the enrichers that provide material that are enriching in the west um they

had essentially no underfeeding last year at all and that's going to be the same for the next few years until they have expanded capacity or demand slows down which it doesn't seem like it's going to according to the news flow that we're seeing almost on a daily basis demand looks pretty uh pretty robust and growing so basically no underfeeding the west but there was some underfeeding coming out of Russia and probably a little bit out of China but that material doesn't really come into the

market but you still have to count it as Supply so let's say 10 to maybe 15 million pounds of secondary Supply last year some of that was inventory we did hear about uh some Japanese utilities selling a bit more inventory last year certainly that didn't put much down pressure in the price of the commodity because we saw the commodity go from low 40s per pound all the way to $90 last year so it it basically almost doubled in over the course of about six months but yeah so secondary uh secondary

Supply on top of primary Supply let's just call it 150 to maybe 155 million pounds against 180 million pounds of actual demand then of course we did have some secondary demand and you could count that primarily as Financial buying purchasing from uh Sprout physical uranium trust from yellow cake from zurri invest fund that they just started up last year um from some individual hedge funds things like that so still on balance we believe there was about A40 million pound Supply deficit all told

last year that's going to shrink a little bit this year but we also we don't know how much financials are going to be buying we don't how know how much inventory restocking will be done because that 180 million pound number from last year which probably can you can push that up to 185 at least maybe even pushing 190 this year based on higher Tales assays both transactional and operational but uh if you consider that uh inventory restocking actually buying more uranium than you need as a

nuclear fuel buyer for your your utility for your power plant that you're operating that's technically sort of secondary demand that's above and beyond that run rate capacity structural demand from the op operation of the plant is actually inventory restocking that's typically what does happen in a environment where you have Rising prices and an actual deficit let alone a perceived deficit so um we have a very large Supply deficit in this sector that's going to persist for a number of

years until we have either a some kind of shock that lowers demand which is impossible to predict or model out for doesn't appear like we're going to see anything like that or B A much larger influx of supply whether that's coming from aggressive selling of inventories which the opposite has been happening we've gone from $18 a pound all the way up to above a $100 a pound since 2016 to the present day and we have seen less material coming into the market not more as the price Rises so that's where we're

at with that new Mine Supply mine restarts the gears are turning the Market's starting to respond to higher prices it's just going to take years before we have the big new mines and the big expansion coming from possibly kazad and problem Kazakhstan until those can even come close to balancing this Market okay thank you for going through that I know probably many people in our audience will be familiar with those numbers but I think just it's good as we start the new year to lay it all out

there and get the full picture so really good to get into that now looking at more more recent news and I know this is not maybe as recent as it was Chicos results news but when I told our audience here coming on this is what they wanted to hear about and I still see a lot of commentary on Twitter people talking about this so want to get your your take on cicos results I know I think it's clear at this point that people didn't really like what they were seeing but I saw on Twitter you commented you know

some of these takes are a little bit harsh so I'm wondering what you felt was harsh what you thought was merited if we could go into that I think what what I was reacting to as being harsh was just kind of like public trashing of the company based on contracts they had signed in the past and their actual realized prices here uh it's pretty easy to understand that a large operating company with hundreds and hundreds of employees and extremely complex mining operations that went through a very very painful period of

putting s uh MacArthur River on Karen maintenance for four years and paying out a lot of money to keep that onare and maintenance perhaps to the tune of $10 million a month to maintain that mine not producing anything that they really took one for the team for the industry and I think that it's important to not forget those sort of things um but it's it's pretty easy to understand that for a company that was experiencing that difficult period of time that they had to sign some contracts in a buyer's

market that probably don't look all that fantastic in hindsight but what we have to understand now is there's a delay for the ACC creative nature of these contracts for a company like cico and this is very different for a developing company that isn't producing yet they're working on building automine um they're bragging about how they're completely leveraged to the upside of uranium prices because they haven't signed any contracts and that's very easy for a company that's

going to produce a million pounds into the market uh and they're working on development to to say these sorts of things and to and to brag about them but for a company that has an immense responsibility to maintain operations that basically had their hand forced a bit back you know 2017 18 19 by the market that was still treading at a price that was lower than their all-in costs to sign some contracts just to keep the ball rolling and to keep their operations going so we're going to see a

delayed effect now what we're seeing is the company has plenty of cash to exist in this market they just had this extremely a creative acquisition the 49% ownership of westing house which has um according to the company according to camoo in this call a 6 to 10% compound annual growth rate which is insane that's an extremely large growth rate they have an incredible Moe with this and the with the with the intellectual property and skilled Workforce that are owned by this company so they have this

whole other aspect of the come with this not just uranium mining but even looking at the uranium mining side their inventory built over for so they were able to add inventory that's a good sign they've got some wiggle room so even though they're telling the market that they might have to buy up to 2 million pounds in the spot Market effectively what they're doing is is establishing a floor in the market so we can see the price drop a couple dollars they might be in there buying a little bit and

putting a floor under that and what that does is it influences the term of the C the terms of the contracts they're citing now so the contracts they're citing now largely Market reference if not entirely Market referenced with very high ceilings and those are going to keep moving up and a company like cico with a history of uh providing into their contracts meeting the requirements of those contracts reliably for decades they are going to be able to demand a premium in the term Market whereas a

term contract being signed by a developing company is not going to have the same terms as the contract being signed by a company that is uh 100% reliable you're going to get the material from them in the future security of of Supply is hugely hugely important so I mean there's look it's obvious they're putting out the numbers clearly they're not exposed to these prices in a way that a shareholder would like to see but that's obvious that that wouldn't be the case when the price of

uranium goes from $50 to $100 in four months no company is exposed to that unless they're selling purely into the spot Market or have contracts they're delivering into that are 100% Market reference and all of the contracts signed three four four or five years ago that are being delivered into now were not 100% Market reference they at least had portions that were fixed and that affects the realized prices of the company making those deliveries so as time goes on their exposure to higher

prices improves and the contracts they're signing now are extremely profitable that they'll be able to deliver on into the next decade so I think they're doing an incredible job as a company um obviously it's been a huge winner in this market as a large cap liquid stock stock that has made in a creative acquisition with the westing house steel so it's it's one of those companies I think that um are exciting to watch for the future it's probably one of those stocks you hold and give to

your grandkids kind of stocks you know it may not be super leveraged to the to the rising spot price but that's not always the only reason to own something so I thought some of the takes were a little bit harsh I understand where investors are coming from but you also have to realize that this company really really uh really took one for the team in a big way with not only with uh maintaining and signing some contracts in the way that they did in the late teens but by putting that M and care and

maintenance and so I think it's really it's it's funny to note that um certain investors were were alarmed by the fact that they have the potential to lose money based on the increasing spot prices because if they have to buy in the market and the price go at5 or $10 and they have to deliver to into a lower price contract that they actually lose Somey money on that which is true but to be alarmed by that and to not be alarmed by $10 million a month spend to keep MacArthur River on care of maintenance

for four years you know how you can't have both of those things so I just I suppose I just wanted to to express that um I appreciate what they've done for the sector and I think the company's going to be fine so with all of that said we're it's a very large cap company obviously the the investing sector can see that they're not super exposed to this Rising price environment for this moment in time and for the next couple of years it gets better but still and perhaps we're in that moment which I

believe we are where we're going to see possibly a bit of rotation not necessarily out of just camoo but the larger cap stocks that have outperformed in this last leg of the market into the midcap smaller caps typically that's how it happens in most resource bull markets as you have a smart money position first and smart money buys what the only thing that the smart money can buy in size which are large cap liquid stocks that's what moves first that's what has moved first especially in this last leg over

the past year year and a half now I think we are probably going to see a period where we see the small midcaps outperform that's what we're expecting going forward okay I think I think there's a lot of points there to follow up on and that certainly helps me understand your take on cico one point that I wanted to pick up on there is you know the differences in the contracts that we saw signed previously and what we're seeing signed now that we're in this sellers market and also I think you mentioned a

difference between you know a contract that chemical might sign versus a company that is maybe a little bit less reliable so anything where you can say there because I think that's all very interesting for investors sure well I think the the term contract um elements are important to understand because they give you an idea about not only what the company has the potential to earn going forward but actually they tell you a lot about where the market is and where it's going so the physical Market there's there's all

these tells in the physical Market I mean there's obviously what the price is trading at right now in the spot Market you can go on num America's website you'll see the bid in the ask if you talk with people in the sector they actually tell you who's buying who's selling and at what price and the spot market pricing that's reported intraday is relatively accurate for what's happening in the physical spot Market but it's the term Market that tells you where the market is going where it's

been so when it's a bare market for the commodity so let's just say that was 2011 until 2016 is when we had the commodity really dropping in price of course it fell from the spike in 2007 but the market was recovering it was still very bullish for nuclear following the GFC following the price where peaked out 134 came all the way back down I think to 40 and then it started grinding higher again and it was very bullish the Chinese were building um we were still in kind of the tail end of that term

Market uh Contracting cycle and then Fukushima happened of course we had a major hit to demand all the Japanese reactors coming offline Germany saying they were going to phase out nuclear etc etc so that demand destruction is really what caused that that beer market more than anything but of course at the same time we had kazakhstan's production continuing to increase all the way to 2016 where they peaked out I think 24,000 tons about 62 million pound during that period of time when it's a buyer Market basically the

contracts are primarily fixed and the reason for that is that's what a nuclear utility wants if you can get fixed pric contracts then you know what you're going to pay years into the future when that material is delivered that you can budget around that gives you a lot of financial stability and that's what you want all day long as a fuel buyer in any Market that's what you're going to want you're not going to get it right now but in a bare Market you had if not entirely

fixed mostly fixed price contracts with uh as the market started to turn started to bottom then you started to see an increasing percentage of those contracts be referenced to the market still you know as we get 2016 1718 we're still seeing you know 6040 5050 fixed price to Market reference and to be clear Market reference is basically at the time of delivery you as the buyer as a nuclear utility you pay a essentially what is the spot price in the in the Market at the time of delivery and then the fixed

price portion is fixed at whatever you sign to that sometimes that's escalated based on um inflation expectations a couple percentage points e or whatever it might be back then a little bit more now um getting into the recovery of the commodity still if even though the commodity was bottoming it bottom at $18 a pound or just under started to recover into the mid 20s high 20s 30s into the mid-30s even at that point because Adam prom was barely making any money camoo was not making any money at 35 bucks a

pound of course they had fixed price contracts and this is something that nobody wants to highlight now is the contracts they signed you know in the previous bull market piding dividends into the bare market right so they they made a lot of a lot more money than what the spot price would dictate as the price was declining now the opposite is true now we're getting into a market where the current contracts that are being signed and have been signed let's say over the last 12 to maybe 18 months

are mostly if not entirely Market reference and I would argue that the contracts being signed right now are 100% reference to the market at the time in delivery what that tells you is that those that are signing the contracts The Producers believe that the price will be higher in the future that's all that really means is they want exposure to where the price is going to go so even though we've seen the price move all the way above $100 a pound you can look at the terms of the contracts to the extent

that you can find out that information and understand where the market expects the prices to go if you're signing fixed price contracts you expect the price to go lower if you're signing Market reference contracts you expect the price to go higher as a producer all the producers are signing contracts that are mostly if not entirely referenced to the market with very high sealings so if you have a market reference contract you're going to have floors and ceilings in that contract the floor will prot protect you as the

producer so let's just say the it's 100 bucks a pound right now 102 whatever it is 103 in this bot Market currently let's just say you sign a market reference contract for delivery 2027 to 2032 and the floor in that contract will be 90 bucks a pound and the ceiling will be $130 a pound uh with escalation meaning if we see large amounts of inflation or you secure that at the time of the contract is signed you'll see a 5% increase on that ceiling year-over-year until the time of delivery so that ceiling is

substantially higher than the current prices that tells you where it's going but also if you put a ceiling in at 130 that is something that you're essentially giving to the buyer to protect them from upside beyond that so a ceiling tells you that both parties are actually expecting the price to go substantially higher than that ceiling so these elements of these term contracts are actually telling us where the people who are buying and selling this stuff on a daily basis where they're expecting it to go higher

essentially one last thing that's important to understand with these contracts is that often times especially in a bare Market when the commodity is priced very low and or in a declining environment the seller would give what are called uh Flex Provisions in this in a contract that would allow the buyer to on their own valtion decide to rece receive more or less material than was dictated in the contract sometimes up to 20% more or less depending on the contract so for example let's say you signed a fixed

price contract or a majority fixed P Price contract in 2013 and it was delivered in 2016 and the price went from $50 a pound down to $18 a pound during that period of time and you signed a contract at 50 bucks a pound and you're getting delivered on in 2016 and the spot price is 18 bucks a pound the turn price is 24 whatever you're going to flex that down and elect to receive less material from that contract because you can just go and buy it from the casx or buy the spot market for nothing so contracts reflex down

during the bare market and when that shifts and the price starts to recover you see contracts flexed up so contracts that were signed in 17 18 1920 that are being delivered on around now is in last year and next year that have Flex Provisions the utilities are electing to receive more material because they sign those contracts at lower prices and if there's any fixed price element to those contracts which there were then you're going to stand a greatly benefit by getting 20% more material than you

initially signed in that contract for then having to top up your inventories in the spot Market at $13 so all the producers that signed contracts and there weren't that many right there's just a handful the irano janian one camoo um kazad and prom couple of other entities and Traders that say they signed contracts with flex provisions and part partially fixed any time in the past that they're delivering on now they're getting flexed up on so what that means is material that is held

in inventory by these entities or material that they potentially have committed out into the midterm they're having to pull forward to fulfill these contracts that are being flexed up so that Flex up ision and the fact that utilities are exercising that option in that provision is vastly tightening the physical Market in the present and in the near and Midterm going forward so it's making things even tighter for producers basically long very long story short okay you know for a market that is

opaque I feel like you pulled out a whole a whole lot of information there for us so thank you for going through that the other thing that I wanted to touch on the utilities is so for years we heard okay we have to wait for utilities to come back into the market now now they're coming back in and this is another place that it's hard to get a good view on but can you talk a little bit about to what extent the utilities are back in the market um and I think I'm just wondering you know we see them

buying but how much how much is there still left to do if we can know that yeah that's a really important question um so last year there was 61 million pounds if I recall correctly after top of my head officially signed in contracts in the term Market it was the largest amount of pounds in in over a decade in a single year um that's reported by uxc uxt claims that they will report approximately 85% of the actual volume down in the term Market sometimes the the details of these contracts are not

voluntarily provided to the price reporters and sometimes they are most of the time they are sometimes they're not so we figured that was pretty darn close to replacement rate Contracting or the volume signed in the term Market roughly matching the structural demand of that of the nuclear utilities globally that year the interesting part is that most of that volume was signed in the European Union really big chunk in Ukraine uh the EU utility signed a decent amount of contracts us utilities

signed only18 million pounds in contracts last year part of the reason for that is that they accept accelerated to a large extent the amount of material that they could receive From Russia with an expectation that it's possible that that material could get cut off going forward so they elected to receive last year I think they received more material from Russia than any year potentially ever um went way above the limitations in the Russian suspension agreement I don't know how they got around that but

I apparently it's not really bleed all that well but it seems to us that the US futilities are expecting this current legislation that's still waiting to be voted on in the Senate that will ban material from Russia to potentially pass and if that passes yes they can get waivers going out into the future it sounds like it's not necessarily um an easy thing but it probably would be granted so this is this would be banned starting December 31st 2027 they can get waivers from the uh Secretary of Energy

but there's always a risk that Russia in retaliation for being banned will say okay we're not going to send this anymore um you know we're essentially in a proxy war with Russia currently if you can tell by the amount of money we're sending to Ukraine so there's concerns around that that's part of the reason why they did not contract as much and they pulled forward a lot of material from Russia but with all of that said there are very large uncovered requirements going forward um uxc estimates if off the top

of my head 1.3 or 1.4 billion pound of uncovered requirements going out to 2035 so in the next 10 years um still before the end of the decade there's still 250 to 300 million pounds minimum that is uncovered and that doesn't include what utilities will do to secure more pounds to top up inventories to build out inventories we still have a very large amount of of uncovered material going forward utilities are mostly covered for this year there's a few utilities right utilities always think ahead because of

the time it takes for material to move through the fuel cycle so they're mostly covered this year next year the EU is is definitely covered the US starts to be a little bit uncovered 2026 a little bit more so really there's only a few years at the end of the decade where there's lack coverage but considering there's no material available until then anyways if you go to camoo or Kaz Adam promo right now and say hey we want material delivered in 2027 they're not going to have it um they'll have to pull it from

elsewhere if they wanted to sign that contract so the utilities are sold out mostly excuse me producers are mostly sold out of material going out to 2028 the converters are mostly sold out of material and conversion going out to that period of time it's a very very tight Market in the near term so uh we believe we're still going to see large amounts of volumes contracted this year and next year and uh potentially another year after that we're year one into the Contracting cycle um and you know the

prices are going higher it's it's a very interesting thing this Market because you start to think okay we're at $103 a pound the previous Market topped out at 134 of course if you adjust that for inflation that gets you to $200 a pound roughly the utilities were not big buyers at $134 a pound couple utilities signed some contracts north of $100 but uh not very many a lot of that was a speculative drive by Financial players this Market is different this is being driven by the actual end users of the

market for the most part yes there is some Financial speculation in the physical Market but it's being primarily driven by the users of the material and that is going to be the case for the next few years as well we don't expect incredible um purchasing from Financial players just because there's not much material there we're already hearing that these next funds that were supposed to show up at the end of last year and first couple of quarters of this year which would be uh the pfyn fund based

out of Singapore that was going to be buying material um a&u based out of Kazakhstan as far as we understand both of these are not happening there's just no material in the market to buy so it's so tight that any marginal purchasing in the spot Market is moving the price we're see we're hearing very very high price targets I don't really like to make make price targets because especially right now because the price isn't going to make sense for anybody you know we can

arguably go up another $20 a pound that will arguably incentivize every project in the world to be profitable but the price is going to go far beyond that simply driven by the substantially larger amount of demand than we have for supply and so we're hearing you know price prices being thrown out there by by the big banks that do analysis on the sector by the bfas and and the caner fitzgeralds ETC that are looking for 13040 $150 a pound as a 12month Target in the spot market then you're hearing

people like guy Keller from Tribeca saying that's conservative we're expecting potentially $170 a pound in the next 12 months so the price isn't going to make sense the price is going to be dictated by what the marginal buyer is going to be willing to pay um as they are going to be in competition with other entities interested in those same limited number of pounds that's what we're about to see okay I think that gives a pretty good overview of where we're at in terms of prices I want to go back we talked

about Cho and the market didn't love those results we should also go back a little further in time and look at what happened with Kazam which released its its results in its guidance for 2024 so people like that a little bit better because they're cutting their guidance for in this year and I think the question that I want to ask you there is is the Target that they've set for this year than looking realistic um well considering that they revised it down to I think it was 212 to 225 thousand tons I think that that's

possible it's all going to have to uh be determined by how much wellfield development in sulfuric acid they're able to have delivered in q1 uh because we didn't see any increase in capex spend for wealth field development in Q4 or Q3 so we have an 8 to 12 month Delay from wellfield development to actual production hitting the market and if we don't see the capex F if you don't see the wellfield development if you don't see a big jump in the amount the money that they spent on suric acid then

you're not going to see that production increase there there's no magic here there's no fairy dust you have to see those two things you have to see either more Wells being drilled and or more sulfuric acid being imported or produced in order to see that jump in production so to to just circle back really quick to camoo because I think it's important I think the market reaction primarily didn't have to do with the fact that they um that their realized prices were substantially below the spot price I

think they were reacting to the fact that they said they were increasing Supply they just heard more Supply and they hit the sell button and which is absurd because camoo first of all camoo own the majority of of both of those uh producing mines um one of them I think is the 7030 the other one I think is 50 something 40 something if I recall correctly with Orono of the top of my head so camoo where does that material go if with their increased production which by the way this year the increase is going to be relatively marginal

they're going to improve on cigar Lake for sure because part of that Miss or 2023 had to do with improvements that they were making to them the Clean Lake Mill and automations they're trying to implement having a little bit of uh kind of bumps in the road in that process but they'll they'll definitely produce above that 15 Point whatever they produced last year million pounds for 2024 will they hit 18 I don't know we'll have to see the cars are just going to be slower to

to increase but they will achieve that in time um they have the capacity they've got the ore they've got the gradings they have the mill capacity they'll be able to hit that 25 million pounds it's probably going to take three to five years to do it and a lot of investment to do it but it'll hit it okay so where do those pounds go camoo will tell you until they're blue in the face we're not spot Mark Market Sellers and they aren't I can confirm that with our contacts that actually buy and sell

physical material they don't sell on the spot Market ever they deliver into term contracts so they are going to try to increase their production to the extent they're able to in Canada they're probably eventually going to turn on their their uh production in the United States it's not huge amount of production but it's pretty good assets um they might even potentially restart rabbit Lake they're going to do what they can to incre production because they're signing very high price

contracts right now to deliver on into the next decade they're talking about cigar Lake Phase 2 my understanding is that is a bit more difficult in terms of grades geochemistry than cigar leag phase one but they'll still be able to produce from that so that's phase two that's late decade into the next decade who gets the rest of the pounds from this production orano what is aran's predicament no pounds out of ner since November okay that's that's 5 six million pounds a year that at this point

isn't happening will that come back online will they be able to get pounds I think so but it's still looking it's not looking all that secure there for them irano is definitely in a tighter position in terms of their production you're not going to see any of their share from Canada's producing mines go into the spot market so to run away and to hit the sell button because camoo says they're increasing Supply is irrational and uh just misinformed okay back to Kazakhstan so

the situation there essentially is that they are prioritizing developing out this very large mine called The Bu NOCO 6 and seven this is a joint venture with rosatom ratam owns 49% of that that joint Venter was pushed through in December 2022 um seemingly to the sugarin of various members of management because out of probably would left the company shortly after that deal was went through but this is a a large deposit it's going to produce I believe North of6 million pounds a year eventually um it's a deep deposit my

understanding is that it potentially has higher levels carbonate than some of their other deposits which basically requires a bit more sulfuric acid on a ton ton per ton basis the ton of sulfuric acid per ton of uranium produced so it's a little bit more difficult it's going to produce but it's taking more acid more time um more development money to get it producing and as they're prioritizing that and they're having difficulty getting more sulfuric acid from Russia they have

limited amount of production in Kazakhstan so the company itself can produce 680,000 tons a year from two sulfuric acid plants and they use right now about 2.2 2.3 million tons a year um which is a lot the rest they have to get from other producers in country or they have to import it the other producers in country have pressure from the state of Kazakhstan to prioritize the agricultural sector for that acid FC acid is primarily used in the production of fertilizer um the other there's these all these little

elements to this that add up to basically a broad statement that mining is hard okay that that's the big takeaway here mining is hard we don't have to think that there's some big conspiracy from Russia's influence or there's some big conspiracy from from camoo to try to put a floor into the market and influence the market mining is hard so what we're hearing essentially is you know give you one example rail cars in Russia right now there's only so many rail cars sulfuric acid that's

imported to Kazakhstan from Russia comes on rail these rail cars are being prioritized for the war effort um they're not being prioritized to send acid to to mine uranium in Kazakhstan that's not their priority so that one little element is affecting things like how much acid they can get so in the meantime until the sulfuric acid plant that they are going to build they're building another plant it's going to have 800,000 tons per year capacity so it'll more than double their existing

capacity for the company to be able to produce they claim that that will be online in 2026 that's probably a bit optimistic but arguably they have every incentive to build that thing as fast as they can right now with these prices company like kadam prom is making so much money at $100 uranium yes they're largely mostly producing and selling into contracts that are lower priced in the current spot Market but still hand over fist they have every incentive to develop Vel that uh that facility as fast as

possible until that's operating and producing more sulfuric acid they're going to have to rely largely on Imports so unless they can get more acid imported substantially we're not going to see a production increase out of Kazakhstan so what we estimate is if they can get that that new facility operating in 2026 then they can largely increase the amount of suffer gcid usage not only in existing mins because if you slow down wellfield development which they did last year you have to use more acid to

maintain production levels in those same well Fields starts to deplete you just it takes more acid to get the same amount of uranium out of an existing well field and that will continue until New wellfields are built out so they need more acid to maintain production if they're not expanding the wealth Fields they we're going to see some wealth field expansion especially for bu off go six and seven but it's going to take a hell of a lot of acid so we're going to have to watch our

financials quarter over quarter in order to make a prediction a year out for their production so you got to you got to rewind three or four quarters to see what they're producing now basically is is how that works in Kazakhstan last point I'll make 70% of this new expanded production for the company is coming from bu 67 that's joint venture with Russia Russia is obviously seeing less demand from the west and they have a very large buildout program they need uranium so what we understand is their

share so radam share as well as gazam prom share of that joint venture for that new deposit all of that uranium is already committed to Russia for the first five years so what that means is this big expansion that the market is expecting from Kazakhstan almost all of that uranium is staying in the East Kazam promise selling more and more of their forward commitments to China and this big new development that is the bulk of their expansion is a joint venture with Russia so this is not a relief valve for the

west by any stretch of the imagination so we need High sustained high prices and we need all of the US developers to get their act together some of them are we're going to need to start to see development of these big projects in Namibia that are going to take years and a lot of money to get them going their lower grades they take uh their lower grade open pit mines essentially so there's there's some water issues in Namibia potentially that could impact these it's not um there's a a persistent

drought in the country but also there's a decent capacity from the existing desination plant that's there that's owned by the French the Chinese are investing in another plant it's going to take some time to come online but my understanding is the infrastructure to deliver water from the DL plant or the re reservoirs that are running kind of low needs a lot of work before we can see these big development projects really get going it can happen I'm not saying it's not going to happen I think

that there's some challenges but I think it can happen but we're not going to see new development mines in Namibia producing yellow cake minimum 2027 and probably 2028 so we've got this three fouryear Gap here where there's just no relief in sight on the supply side okay you you're explaining it very logically I'm glad you kind of put that con here's the angle to bend because I did have someone ask me the other day a question to that extent and I spent a lot of time in gold and silver where we

have things like that going on and I was like I can't handle this if it comes over to uranium so great to talk about that I want to go back just briefly to a point you made at the beginning about the equities and the movement that we're seeing so you reminded us that of course usually we see those bigger more liquid companies move first okay that's what we've seen now it sounds like we're heading perhaps into a different phase of the the stocks so any anything you can add there and what we should watch

for sure um I've been tracking something which uh I like to do these ratio charts so I'm looking at a chart um of urj charted against camoo so camoo is obviously the the primary large cap in the sector that everybody knows and and it has obviously seen a great run and a lot of flows it's very liquid and &j is an ETF by spra the uranium uh junior minor index and that doesn't hold camoo or Kazam problem I think there's might be one or two other larger caps that it also doesn't hold possibly Paladin if I

recall correctly I think UEC is its largest that it's holding um so it's which is still a relatively larger cap stock but it doesn't hold the the three or four of the largest in the sector so tracking that it's basically a big basket of small and midcaps charting that against camoo and it's breaking out um we're we're literally probably tomorrow we're going to see a golden cross on that which is the the 50-day rising above the rising 200 day moving average on the technical chart so it

looks like it's already happening so that's kind of evidence that it is happening it's not necessarily the theoretical we are seeing relative outperformance since uh December uh of the small midcaps against camoo and other large caps as well so we're starting to see that it's also just I mean the main theory around this is that as the story gets more popular due to its relative performance and it starts to attract more investment attention let's say you're going to attract a lot

more retail investors and the retail investors largely go after the smaller companies because they believe that there's torque in those companies and there is torque in those smaller companies unfortunately when risk is off that torque is to the downside when it's on um they can they can outperform by orders of magnitude so that's what I think we're going to continue to see of course it's not going to be a straight line up on a relative basis but that is also what we did see in the previous

market and so there's historical precedent for it or uranium specifically also I know you follow other sectors um precious metals other mining sectors this is the case for most resource bull markets the the smart money goes after the big liquid stuff because they usually position first and then when things get really froed up and there's a lot of attention lots of news stories the sector really catches a bid then retail kind of piles in and they just buy anything that has uranium in the

name and most of the time that'll just go up so but urj I think that that fund is uh is certainly helping the small and midcaps in that uh relative outperformance and I I do believe we're going to see more of that going forward the other point I wanted to make on the stocks is I I seem to be seeing a lot recently when the ETFs do their rebalancing and things like that it creates a lot of I I don't want to say the chaos but a little bit of turmoil among people people trying to figure out

what's going on there and I wondered if you had any advice on how investors should should look at that and should take that into account when they're they're looking at the market my advice is to ignore it to be completely honest um every single time there's one of these rebalances there's something that catches me off guard it doesn't matter how much time I put into digging into exactly what's going to happen it never plays out exactly like that so you never know if the ETF is going to kind of

nibble week before the expiration of that rebalance or if they're going to slam the market the last five minutes of the last day of the rebalance I've seen both um it's in my experience for me it's been a waste of energy to try to do anything around the rebalances so my advice would be don't trade around it unless you can actually um very highly confidently determine that a stock that isn't held by it is going to be purchased by an ETF in that case you can speculate and buy it ahead of time

because the flows coming from the ETF not only just in the addition to the ETF but there's clear outperformance uh by the stocks held by the ETF when we're in a bull market and you know what it's interesting Charlotte because even during the periods of time where the market has vacillated or is or has pulled back you know we had multiple 30 40 larger percent pullbacks um from in from intra bull market Peaks to intra Market troughs we've seen a couple of gut-wrenching pullbacks and then we've

seen a lot of periods of time where was seeing some cha during those periods of times the inflows largely continued into the ETFs so what that means is even as the sector on balance is selling off uh both the individual stocks and the ETFs we were still seeing in many cases flows moving into the ETFs so everything that was held by the ETFs generally speaking didn't sell off as bad as what wasn't help so some of these small cap Explorer stocks that haven't been held by the ETFs are down still very substantially

from let's say the November 2021 highs whereas if you look at the large caps and the midc Caps that are held by the ETFs most of them um all of them if you look on a market cap basis that of course the share count has increased since that period of time for most stocks but many of them are at all-time highs if not multi-year highs and definitely higher than that previous Peak which they should be at $103 a pound uranium for God's sake but if you can recognize that a stock isn't held by

an ETF and it's about to be held by an ETF that's the typ type of speculation as far as trading in and out based on expected buying or selling that's a game I don't play and I would advise against it generally speaking okay I have I one last question for you before I let youo and you know before we had turned the camera on you're talking about how there is a tendency right now among uranium investors to be looking for the next Catalyst and I kind of laughed in my head because I'm totally guilty of that

I'm sure I've asked you before in previous interviews what's going to be coming next but you know you had some resistance to that you know maybe we don't need all these new catalysts or brand new things so maybe we could end on that note what you're seeing there and your thought process around that sure I mean catalysts are important right if you can if you can recognize uh an upcoming Catalyst ahead of time you can you can either be more confident in holding your positions or you can have

the confidence to add to position or to make initial purchases of positions prior to an expected Catalyst one of those of course was the recent news from kazad problem they unexpectedly gave the market a nod about a month before that trading update letting them know that they would likely be revising down their guidance and we expected that multiple months ahead of time you know they released in September of last year that they were revising down their capex so for 2023 so this is very clear to us if

they're revising down their CeX for the year um it wasn't theoretical they will not hit 255,000 tons it's just not going to happen they're not going to see a 20% increase in production if their cap X is is is diminishing so that was very easy for us to recognize and of course we made that clear to you know in in multiple public interviews but also to our membership like they're not going to hit that and they're going to have to tell the market that they're not going to hit it and usually that happens in

early February we didn't expect that news in January but luckily we recognize that month's prior so that helped us hang on you know after the move that we saw September October November we had a pullback in December um hang on through that period and and add to positioning with high confidence that that news was going to come out so in that sense we perceived that as a potential Catalyst to not only move the equities but also move the price of uranium which it did both of those things so I don't want to say that

catalysts aren't important but I think that a lot of retail investors in the space know the story decently well from the previous bull market which really the story back then was the Chinese were talking about vastly expanding their market and they were coming into the term Market pretty heavily nuclear was growing the price was starting to move up on all of that news after bottoming and going through a brutal bare Market leading up to that as well from the spike that we saw back in you know the

70s of the early 80s then when you know price declining and chopping side was for a decade and a half so this price started to move up that started to get investors attention but what does everybody know about the previous bull market cigar Lake flooded all right that's the only thing that a lot of people know about that market and then the price went nuts it did the price jumped but we already had a recovering bull market before that that just basically gave the market a perception of uh of a

supply a supply deficit situation we didn't actually even have a supply deficit at that time we had enormous secondary supplies not only coming from kind of the initial the early earlier years of uh gas centri fuge enrichment that was ramping up at the time and some some underfeeding from enrichment but we also had megatons and megawatts still until 2013 20 million pounds a year secondary Supply coming from down blending of nuclear warheads so we had a far more of a secondary Supply buffer in

the previous market and no actual real structural Supply deficit it was minimal but that flood along with um I think there were two floods if I recall correctly and there was an impact to one of the producing or developing mines in Africa with some weather event there as well but that was a catalyst that didn't move the price and it feels like to me investors are uh and to their credit this is a long bull market it's already been what has it been it's been seven it's been almost eight years since the

bottom of the commodity and the equities generally speaking have moved up from the along with the commodity but we had we had multiple years from $18 a pound to 30 something where the equities were sideways to down I was exacerbated by just general equities markets and of course Co so the equities this has been a long market and if you've been holding off for those period of time especially if you didn't Choose Wisely in the Securities you hold you're probably like damn it when can we just have something

blow up and make this sector Moon so I can retire and I feel like that's a lot like a largely held sentiment in the sector of like people just want they want the conspiracy theory they want the mine flood they they want uh the kazak to miss and to decline production in a big way they want another event in in cigar lake or MacArthur River and we don't need any of that to happen at all we don't need any more catalysts we've got a 30 to 50 million pound Supply deficit in the market probably for the

next 5 years that's what we're looking at and that's what's going to move the price and and I especially feel like I have that sentiment now because of being an advocate for the industry as well it it those two things don't have to be um buding heads you can be a nuclear Advocate and also want the price to go up in fact you should want the price to go up we need sustained prices in order to I mean I'll just say we need sustained prices probably north of $200 a pound why because that will

incentivize innovation in the sector because there's no way in hell we're going to be tripling nuclear energy by 2050 to meet meet these like expressed targets at cop 28 last year unless we have new ways of sourcing uranium it's going to be very very difficult to mine 350 million pounds a year out of the ground in uranium mines when we've got 135 or 140 right now so seawater extraction phosphate Tails um phosphate mining in Morocco uh I mean whatever those are probably the the the big ones

that I think are going to have to happen in the future in order to really support this industry for the rest of the century that's what I'm pulling for I'm not pulling for am measly $150 a pound so that we can get you know all the namian projects and the US ISR projects online no we need that and that is going to happen um but we really need probably as much higher prices you can have both things you can pull for the industry you can pull for higher prices and you don't need to pull for some cataclysmic

cataclysmic event it's going to send prices on a moonshot um so I would just say keep the big picture in mind keep the longterm in mind there's a protracted Supply deficit that lasts as far out into the future as we can see right now and if you want nuclear to continue to expand we want these projects to come online we want new Supply um we're going to see high prices either way so there's my barment spee for the day okay I think definitely food and for thought I hope people stuck around to

hear that at the very end of the interview thank you so much for going through that I think it's a good point to WP up my pleasure thanks a lot nice talking with you again always good to see you and once again I'm Charlotte McLoud with invest.com and this is just H with uranium Insider thank you for watching if you like this video make sure you subscribe to our Channel we'd also love to hear your thoughts so leave us a comment below we'll see you next time [Music]