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 [Music] I'm Charlotte McLoud with investing news.com and here today with me is Adam Rosen swag managing partner at Garing and Rosen swag thank you so much for joining me today great to have you as always yeah nice to see you as well really good to be speaking with you I think it's a good time to be catching up and today we're going to focus on the uranium sector so so much going on there where I wanted to begin in is you recently had your quarterly report come out and there's a section on uranium in

there I thought it was really interesting I do encourage people to go take a read you did a recap of the history of the market and you broke it into I think four past stages and a fifth one that currently we're in I don't I don't want to ask you to recap almost a 100 Years of uranium history but because past can be prologue I did want to ask you to talk about one point that you made which was that you know in many ways uranium's been in a persistent bare Market since 1980 or so except for

one break that you talk about so I thought that was a pretty wild statement pretty interesting to look at so I wonder what you could say there from that that historical angle oh absolutely absolutely and you know I am going to go back the full hundred years because you know that what fun is it to only do half the story so if you think about you know uranium and and nuclear power in many ways it's like the complete opposite of the oil and gas business where you get great data coming out every Wednesday

and everyone kind of hangs on each little data point and the market moves it seems like at a frenetic Pace the uranium Market moves so slowly in some cases that it can you talk about years and even decades and so you can really go back and right from the very very beginning of uh splitting the adom and the Manhattan Project you can almost divide things into like you said four periods so the first thing that happened was you know obviously from from 19 the the the very start of the Manhattan Project in early 1940s all the way

through until um until about 1980 you produced way more uranium than you needed and it makes sense right at the beginning it was purely a weapons program it was Pur a government strategic uh resource that we didn't have any nuclear reactors until 1960 and so we were out there accumulating all the uranium in the world and putting them into these government stockpiles and making them into weapons nuclear reactors came on the scene beginning in the 1960s and actually believe it or not it it ignited a massive uranium mining

boom through the 1960s which was a time of all these investment Manas the nifty50 and the mutual fund gunslinging craze the conglomerate craze but you know you could go back and there there was an an old adage that you know every young Wall Street guy would have a copy of the northern Miner tucked under his arm and I think they would even send you know analysts up and drive them up to Montreal to bring them back down the next day for you know people really in the know to have uh and it created this

huge huge uranium mining boom but there wasn't enough reactor demand and so you built up not only government stockpiles but then you built up all these commercial stockpiles and then until 1980 you know you just kept doing that and kept doing that and kept doing that finally 1980 the government said look this is enough we have more weapons that we know what to do with we have all this uranium in our government stockpiles let's start to reclassify that as commercial inventory and let's start to

work on how we can decommission some of our weapons and turn them into nuclear fuel for for nuclear reactors and that created this wash of secondary Supply beginning in 1980 mine production collapsed CED as a result of that because you simply didn't need all the mines operating to meet the reactor demand and from 1980 all the way to the middle 2000s you had a primary deficit if you look at reactor demand and you look at total mind Supply reactor demand was greater than mine Supply well how could

that be for for 30 years it's because it was just whittling down these stock piles whittling them farther and farther and farther and farther down until finally in the middle of 2000s you hit the Tipping Point where I think you got down to like 200 million pounds of inventory left in the commercial markets uh on a days of cover basis you were getting Tighter and Tighter and Tighter and then uranium prices just took off and that's when they went from about $9 up to $150 in a few short years and the

last major speculative boom of uranium juniors in Australia and in Canada mind you most of which if not all of which never made it into production um that was because we had kind of worked off those stock pilot for the first time you could argue for the first time ever and no sooner than that happened that you the GFC and the price of everything got got sold off it turned out in retrospect when Leman Brothers went bankrupt in 2008 that they were sitting on like 15 million pounds of u308 sitting up in C's

warehouses in saskatch one that's that's the kind of speculative uh side that this was taking on at that point the hedge funds came in and started to play it I'm sure Leman Brothers was not the only one they were just the only one that had to show their balance sheet at the end of 2008 um uranium came back and then Fukushima happened and we shut down 30% of our reactor demand um you know in the world obviously not just in Japan but all through Western Europe uh and all of a sudden oh and at the same time

I should point out also Kazakhstan responding to the last boom from 10 years prior brought on all this new production and so at just the wrong moment you started to build these commercial inventories again and by 2017 you got to the point where total commercial inventories were nearly as high as they were at the peak back in 1980 and prices had fallen back down to $19 a pound you know at that point camoo could actually go out and buy Spot material cheaper than they could mine it they would sell that into their higher

priced future uh order book and so they shut in their production at mcart the river and cico and Kaza problem shut in some of their production as well the market balanced and again you had this primary deficit reactor demand was head of Mind Supply and again commercial inventories went down and down and what's so interesting is that right now you're back to where you were in the middle 2000s you're back to that kind of 250 million pounds on a days of cover basis it's even lower because we have

more demand now than we did back then and um you're at the moment of inflection where in the past uranium has just surged higher and I think you're starting to see it right so obviously as we speak today it's the 29th of September uranium has crossed $70 for the first time since Fukushima and what we're hearing is that part of that is speculative demand but part of that is also the fact that the fuel buyers who really forever could trade this Market very aggressively because there was

always a secondary Supply somewhere either from the underfeeding and the enrichment or from the Russians or from the Fukushima stock piles you know it it was you don't want to say it was easy but it was kind of easy to be a uranium Trader you could be very very bold because you knew that there was these pockets of liquidity and material available for you that I think is Now quickly beginning to change and a lot of these guys are beginning to realize that they're undercovered for the next

several years and so I think you're starting to see this this melt up in terms of um in terms of price okay that was really good we've went much further back in history than we usually get to hear in terms of this market so I appreciate that and so we're in this fifth stage now as you've described it and I was going to ask you know where are are we at in the current cycle and I think you've kind of answered that but is there anything else you would add in terms of where we're

positioned at the moment I think we're just starting and I think this is going to get completely out of hand and I think one of the reason it's going to get completely out of hand was really two things so first of all from a demand perspective it's really hard to say what price is too high it's hard to say where will you see demand destruction because the total cost of a uranium fuel rod in a nuclear reactor is di Minimus particularly if you've already sunk all the money to build the thing right so

you you will do everything in your power to keep that reactor spinning and so could you take uranium to $300 yeah absolutely you could take it to $500 there there's no there's no demand destruction in this equation at least in the near term maybe at some point you might consider not building the next stage of reactor although I think we're far away from that but on something that's already spinning there's no chance that you don't buy uranium so you have a captive buyer it's not clear

where the material comes from and the thing that's now making everything much more complicated is the introduction of the sprot physical uranium trust which used to be the sprot or they used to be the uranium participation Corp up in Canada still in Canada and in full disclosure we own um you know good core position of the Sprout physical uranium trust in all of our accounts and that now has a mechanism by which if that fund trades it a premium to its net asset value they can issue shares in the market take

that cash and go and buy uranium and if it trades at a discount they don't have to sell uranium so that material comes off the market it's effectively trapped in this vehicle and right now between it and yellow cake we we estimate there's about 80 million pounds tied up in this financial trade so it's pretty sizable and it's not going to take the speculators very long to realize that they can really kind of bull up this vehicle uh get it to trade at a premium which will then allow them to issue

shares go out buy uranium push the spot price up which will then help the bid price on the underlying that asset value so it becomes this kind of like self-fulfilling prophecy in a way and as of now you know people that are really into the uranium Market talk about it now you're hearing a little bit but it's not going to take long before you know the hedge funds and the major you know Quant funds and whatever realize that this trade can be really pushed into excess ultimately probably be a bit de

stabilizing for the market but it's a it's a vehicle now in a really thin physical Market that I think could really uh push things much higher much faster than people think and over the long term what's going to undo this bull market it's eventually going to be Supply you know we know where there's uranium deposits they need higher prices to move forward we're kind of getting into the money on some of them now they take several years to bring online so I don't think that there's a near-term

risk to supply demand outside of some really you know big exogenous shock but eventually it's going to be new Supply that comes on that will spell the end of this bill Market probably at the end of the decade okay I think that gives us kind of a good where we are now where we're going so I want to get into supply and demand a little bit deeper and I'll start with demand because you were mentioning a bunch of the things that are going on with Demand right now so we have this changing sentiment around

nuclear energy which is really helping to it seems like almost every day we hear new announcements about different countries that are moving toward nuclear power so there's that really solid aspect there's sput as you mentioned I wanted to ask you about other physical uranium investment vehicles that seem to be popping up and then the other wild card demand factor that I've been hearing a little bit more about is the smrs where they're out there but people maybe don't want to factor in how much

demand it will be so anything else we can say about some of those aspects of the demand side yeah what's so interesting about the uranium market and about the nuclear power Market as we think forward over the next several years is that this whole nuclear Renaissance in the west and this whole smrs uh small modular reactors that people are now very very excited about they mean absolutely nothing to this uranium investment thesis these are not things that are coming online before the end of the decade and I think that's

really important because I think there're actually really important elements of demand in the 2030s and I actually have spent a lot of time on site at several of the small modular reactor companies and we're trying to get more under our belt but I've been to most of the big ones at this point and I think some of what these companies are doing is really revolutionary and will be critically important going forward but none of them make the slightest bit of difference to supply and demand

Dynamics between now and 2030 what you have now is you have a China reactor buildout story you have an India uh reactor hopeful plan and you have Saudi Arabia looking to build reactors as well and that's all you need that's what keeps this Market really tight till the end of the decade now maybe I'll temper that by saying one thing it's nice that we don't have more shutdowns certainly premature shutdowns of Western reactors you know that could have really spelled further bearishness um and we are seeing

some life extension and permit extensions on existing nuclear reactors in the west so those things I suppose help to tighten the market because you don't get this same attrition you don't get the same shutdowns of these Legacy projects that you might have been concerned about only a few years ago but the West has nothing to do with this from a demand story this is a Emerging Market mostly a China story over the next several years where the West does play a very important role in this bull

market is an investor sentiment and so if investors get super bulled up here they're going to put money into camoo and they're going to put money into probably NextGen and Dennis and whatever other ones and we own all of those again for full disclosure we think they're the best projects out there um but they're very quickly going to realize there's not a lot of ways to play uranium there's not a lot of ways to get investment and so you're going to see a lot of money pour into that spot and

it's going to it's going to be a self-fulfilling prophecy so that's I think the role that West has to play it's to kind of screw everything up with speculative excesses like we always do but the fundamentals are going to be driven by by mostly by China okay I think that gives us a good picture of what's going on with demand so moving over to supply I often hear that Supply is the much more complicated sign there so I'm going to start with some recent events so we had kazad prom

say that they're going to stop restricting their output starting in 2025 if I'm getting that correctly it sounds like they're saying okay we see the new Contracting cycle beginning so we think that we can do this so I wanted to start there because that's that's kind of a recent development and see you know what effect does that that actually have on on the market what should investors know yeah it's very recent it's just this morning yes so there it's a it's a bit of an open

question yet and I think the market is still you know digesting it the uranium stocks are down today on the news of that they've been very strong in the past so I think that's just some normal consolidation on the surface I'm a little bit skeptical because they've never produced they're talking about getting ultimately what is it to 30,000 tons they've never produced uh 30 30,000 to 31 a half thousand tons of of U uranium not u38 and you know they' never produced at those levels before so

there's kind of this talk yes they did decrease production a couple years ago around the time that camoo did and they have brought that back online but there's sort of like a talk like well we're just going to you know turn the spigot back on and bring production back up from all the stuff we've been restricting but they've never produced anywhere near 30,000 tons per year of of uranium so I think that there's going to have to be some increased investment there now in situ leech production in

kazakstan does tend to be shorter cycle but that seems like a very ambitious Target and kesat prom which we do own also um has had a pretty repetitive history of missing their production targets so I I don't know that this is kind of written in stone uh just yet uh obviously bringing on news they're the largest uranium producer in the world and so bring on an additional 10,000 tons per year of uranium um impacts the supply and demand balance but actually the deficits are so severe going forward

over the next seven or eight years that it definitely does not swing this Market into Surplus it keeps things very very tight we do have this primary deficit in the market today um and which has been met by the stock piles that are now going away to zero so the market can definitely absorb it and I wouldn't be so sure that it's coming online quite the way that they claim okay yeah that's definitely an interesting analysis there and and something for us to watch so when I when I saw that news I thought okay so here

is a producer saying all right the market circumstances right now are good enough for me to bring more Supply online although as you mentioned they could face setbacks perhaps what about the Greenfield project so we've talked I think in the past about incentive prices for Uranium so if you're a company who has a Greenfield project not in production many you're in exploration kind of stage what price do you want to see at this point you know Arrow claims to be next gen claims to be the lowest cost I think

they have like $55 in their in their pre-feasibility study I think realistically that number is probably closer to $70 a pound just given the fact that you know the banks are still skeptical on uranium yes it's in a bull market but it wasn't too long ago it was only 19 um and and in our estimation arrow is probably the best undeveloped dur ium deposit in the world so I think it will be the first to go and and it's going you know they're they're they're starting down that path right now um

what's the price that's needed I don't know somewhere between probably 50 and and 70 and that's the best you know Dennison looks really good too in the wheeler project so that could probably comes on slots in next you know they there's some more technical challenges there but they seem to be doing really well in addressing those and and they have you know water incursion that they're going to have to freeze their their aquafer and stuff like that which orally when we had sort of heard of

those plans we said oh my goodness that sounds awfully complicated but it seems like they're doing a really good job on their you know feasibility pilots and stuff like that so I think that that that'll probably be the next those are the highest grade best quality projects um you know after that you need higher prices you know you need higher prices and I think that again ultimately when I think forward as to where the like long-term sustainable uranium prices it's probably around 120

I would suspect that if you had that nice and stable for a period of time you could probably incentivize and bring online enough production to meet demand um you know open question but I think it's somewhere around that line it's not going to be demand destruction that ends this bull market it will be new Supply but it's going to take time and arrow is talking about coming online in 2027 I think that'll depend on whether they have to build out all of their you know upgrading facilities themselves which

which is what is in their plan now that seems ambitious if that's what's going to happen you know if ultimately something happen and they combine with somebody else that has excess capacity around there that might be you know a way to bring that on faster but I think 27 28 for the newest production is probably the best that you're going to hope for um C kazad A prom's announcement today we'll have to wait and see whether there's anything to that and then there's a little bit of insitu

production in the United States which used to be the world's largest uranium producer and now produces nothing not the most economic production in the world but from a security as Supply basis I think that's really driving people policy makers in the US to push for more domestic uranium production so those will probably go what order is that you know give or take but I think it's probably you're looking like from now to 2027 I think it's pretty tight yeah okay that's really helpful

because I think I think you know in the past people would talk about you know that one incentive price that we will see and then Supply will start to come online but as usual it's more complicated than that there's there's different incentive prices to depending on the economics of each project so continuing on about Supply there's a lot that we could go into about Supply but I'm going to put it back to you and just ask you know what what key Supply factors would you pick out for investors

right now so I think the thing that really is most important on any commodity Market on the supply side is to watch how much money gets actually invested in the ground because there's a bunch of different things there's the price of the commodity there's the price of the stock and then there's how much money gets raised and actually invested and one follows the other follows the other but it doesn't always have to and we've seen cases in the past where you know prices of the stocks get nice and

high uh however they don't necessarily have time to raise money and bring on new projects and stuff like that and you know copper back a couple years ago was a good example you know copper bottomed in 2015 and by 201819 you know the stocks had run pretty well and and what have you um now if they were able to raise all kinds of secondaries and IPOs and debt offerings and sanction all these new projects you might have a problem but copper prices fell back down and the stocks collapsed sooner than

that could happen and so you didn't get anything really invested uranium I think is the same you know the stocks are moving now but there's no new projects that are really moving forward so C's announcement today I suppose is is the first uh you know watch Arrow and watch watch what camoo does um but you know until you start to see money get deployed I don't think think you have to get too worried once that starts to happen and once that really gets going that tends to be kind of the kiss of

death in any commodity market and that's when you should start to get a little bit skeptical but it's a while yet it's a while and quite frankly you know you did talk about the smrs and you did talk about you know the nuclear Renaissance in the west if we end up in a deficit that takes us through the end of this decade then there becomes a very real question of whether we can bring these smrs on faster than we can ramp up uranium demand and that's a much longer term issue because now you would be in a

major new buildout phase um so that that's something to watch as we sort of progress down this decade but for right now you know I think we're we're in a in a pretty good sweet spot here where there's nothing that can come online really quick there's nothing that's just waiting you know in the wings um all this uranium enrichmond underfeeding that's all gone you know that's you've had swoo shortages and that whole stockpile is kind of swung the other way um your your commercial stockpile seem

to be large virually uh depleted you know at some point I would suspect and this is pure speculation but at some point in the future as the utilities begin to really get nervous about where they're going to Source Supply maybe they go and clean up some of the stock piles that are now accumulating in in the spot physical uranium trust I mean it seems like a natural source of physical material they might have to pay a premium that's complete speculation I have absolutely no idea but at some

point we're going to have a physical shortage and remember just for your listeners you know uranium is also really weird Market because it goes in these threeyear fuel Cycles right and so like somebody said to me well how how do we keep the reactors open you know what's coming out of Russia after Russia Ukraine are they exporting uranium to the United States are we getting you know all that enriched uranium and the fuel rods and how how do we keep these reactors going well it's because you

have a three-year fuel cycle in every reactor and so the day you have a market disruption it doesn't necessarily cause a Cascade but that does catch up with you eventually and so here we are you know a year into this and these are all very very open questions and you know we are going to have a very tight physical Market in a hurry okay and I think the next step then is to put this together the supply and demand into what it means for prices so I'm seeing kind of right now a couple of key questions that people seem to be

asking and one of them is how high the price could go which you kind of addressed at the beginning so we don't necessarily have to go into that but then the other thing that people seem to wonder is okay not only how high can it go but do we get that price spike scenario or does the increase look a little bit different so I'm curious to know your thoughts on that always tricky to to you know predict that but I'll give you my best guess I think over the long term on a sustainable basis I think

the market both supply and demand can probably sustain $120 a pound and that would be enough to bring on Supply over time I don't think though we've spent enough time in the last 10 years investing in the pipeline line investing in the supply chain to work ourselves through so I think as of today I think that a price spike is very likely well in excess of that and I think that it's it's entirely plausible to see uranium at $300 a pound um in a spike now that won't be sustainable but it almost it

almost seems likely I don't you never want to say certain that you're going to overshoot that 120 for sure because I don't know you know if you took uranium to 120 tomorrow that's not going to change anything that's not going to make more material suddenly appear overnight so so I think that that a price spike scenario given the peculiarities of the uranium market and given how sticky demand is I think that a price bike is very likely and I think a long-term sustainable price is probably you know I

think 120 brings on enough Supply over time could you get 300 before then I think absolutely okay so thank you for going through that I think that helps us understand what's going on there so the other thing I wanted to do is make sure that we relate all of this back to investors so investors I think are in kind of an interesting scenario here when it comes to uranium so you've mentioned a whole bunch of names that that you like but we're in an interesting uh time right now where okay

so we might have a price spike scenario there aren't a whole lot of names out there to choose from I don't think we've started seeing companies get excited and pivot to uranium because the price is going higher although I imagine that's to come but you know how can investors strategize right now in this kind of time of uncertainty but High optimism well you know I do think that there there are really two primary producing uranium companies in the world one of them is in Canada that's camoo

and one of them's in Kazakhstan and that's Kazakhstan uh Kaza prom so people have to get comfortable with Kazakhstan risk some will some won't it's not listed in Kazakhstan it's listed in London it's an it's an ADR depository receipt in London traded in US dollars but the Assets in Kazakhstan there's no two ways about that um so there has to be some comfort there that stock is awfully cheap it's probably trading at half the valuation uh off the back of an envelope that that camoo is uh but of

course you know it's in Kazakhstan um after that you're either forced to look at a Tracker vehicle like the Sprout physical or like yellow cake in London or you go into the development stories and then from there it's just how much risk you want to take and how speculative you want to get and you can you know there's companies that are kind of further along and again I mentioned the two that we think are the furthest which would be NextGen and and Dennison and from there it just really fans out

into into whatever you know there's something for everybody after that but they're all quite speculative they're all very early stage um and and yeah yeah I think that's a good way to describe it you know something for everyone depending on on what your goals are there so I want to also when it comes to the companies bring up another piece of current events so this past week we had the merger announcement with ISO energy and Consolidated uranium and I'm curious to know if you think we're

going to see more m&a activity in this sector in this environment that we're in currently it's a really good question and please don't ask me any details on that particular one because it's not a transaction that I followed too closely but there could be a few natural consolidators there could be a few natural deals that kind of make sense and look typically when you get animal spirits going through some of these markets you do get to see things like that um you know there there there's

not there's a few that jump out immediately and there's a few that you know who knows I'm not going to speculate on what what may happen but you know like I said there are there are certain projects being Advanced where you know some need additional infrastructure and other companies nearby have excess infrastructure that would strike me like an easy fit to put together but who knows I mean i' I've never done very well playing the m&a game I prefer to look for really high

quality assets and more often in than not they end up getting taken over but it's never by who I expect and when I expect it okay I think that's that's really fair so I've gone through kind of everything that I was hoping to cover with you but I am going to throw it back to you just here at the end and ask if there's anything else you think investors should be aware of in the arene Market at the moment things that you're watching well you know I do think from a kind of really big picture

perspective um you know there's all this talk going on about the future of energy and for a long time obviously Renewables were the darling technology and we always were extremely skeptical because they're very very inefficient forms of energy transformation basically they require so much material to make these things and that material requires a huge amount of energy and so now all of a sudden you're in a bit of a a downward spiral where you're making energy using a lot of energy and that's never a good

idea um but IT addresses this question well then what do you do if you're worried about carbon and climate and of course to us the answer has always been nuclear nuclear is the most efficient form of energy transformation ever invented three times better than the best oil and gas 10 to 20 times better than the worst wind and solar particularly if you have to back them up with batteries so to us this was always the answer and you know while everyone seems very pessimistic about everything I think that perhaps we could be on the

verge of a huge major transformation where finally we do appreciate nuclear for the unbelievable technology that it is you know we could be at a moment in time that's just as important as you know England around 1650 when they went from chopping down trees to burning coal and that ushered in the biggest period of prosperity and economic growth that that Humanity's ever known so I'm actually very very optimistic and you know you're starting to hear and see things like you know steel companies

beginning to look at Technologies away from coal and the question there is well how do you power the thing how how do you get the electricity because they they're all very electricity intensive and you're starting to hear rumors and even some announcements of nuclear power being used uh to you know be married uh to to one of these energy intensive materials processing hand facilities and uh generate you know carbon- free steel let's say that would be you know unbelievable advancement just to put

that in perspective you know steel generates as much carbon dioxide as the total Global passenger car Fleet so if you can crack steel and you can do it using the most efficient form of energy known to man you can not only reduce 9% of CO2 but you could do it in a way that's much more energy efficient than way you do today so I think the the really the possibilities are almost endless nuclear's had a few false starts in the past you know 50 60 years one of the main reasons is because we've had so

much cheap abundant hydrocarbon energy you know the biggest Advocates against nuclear for years was the coal Lobby those people I promise you now don't have the same budget that they used to at the very least and I don't think they have the same friends in Washington and Ottawa that they did before and so you know perhaps we're we're really going to see an energy transition that makes sense here and maybe that could be just one of the biggest biggest bullish Tailwinds that nobody has in

their models for the whole planet for the next 50 years so that's my bullish very optimistic end that I'll leave you on yeah I think that's a great note to finish up on thank you so much for for joining me today to go over what's going on in the irainy market this is really informative thank you so much of course and once again I'm Charlotte McLoud with investing.com and this is Adam Rosen swag with Garen and Rosen swag thank you for watching ing 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 [Music] time