Hello everybody,

It is a very lengthy and detailed overview of the scenario within the very tiny uranium spotmarket. You’ll in all probability have to learn it a pair occasions, sorry. However if you wish to join the dots of a market, it’s essential discuss a number of components.

If , take your time in coming days to learn this and to search for further data on the factors talked about right here.

This isn’t monetary recommendation. Please do your individual DD earlier than investing.

A. Intro

Earlier than studying the lengthy submit in regards to the uranium spotbuying vs uranium spotselling, first this:

a) The true motion for the uranium and nuclear sector is within the LT contracting cycle. The uranium spotmarket for utilities and enrichers is primarily for changes in U3O8 wants

A modern chart from Cameco exhibiting the rising world uranium provide deficit: https://twitter.com/quakes99/status/1623666351532568576?cxt=HHwWgMDTzbb8tYgtAAAA

b) About these ~25Mlbs/y of main uranium manufacturing being bought by way of the spotmarket. That is based mostly on the identified uranium manufacturing of spotsellers (Olympic Dam, Uranium One, African JV Companions, Itochu (Navoi), …) and confirmed by world provide and demand graphs speaking about 2021 and earlier than. Additionally the whole world uranium manufacturing in 2022 was ~135 million kilos. Whole world uranium manufacturing in 2023 might attain ~150 million kilos (beforehand 155 Mlbs, however Kazakhstan will produce 4 to five million kilos much less in 2023 now) in 2023, if every part goes in accordance with plan. That’s it! So the extra uranium kilos bought within the spotmarket,the much less will be bought to utilities by way of LT contracts and vice-versa. You possibly can’t signal extra LT provide contracts for supply in 2022/2023 and promote extra uranium by way of the spotmarket. The worldwide market has to do it with 135/150 million kilos produced uranium in 2022/2023.

c) Comparability between what occurred in October 2006 within the uranium sector and what’s taking place at the moment:

Simply to place it into perspective: The impression of the shift from underfeeding to overfeeding (20Mlb/12 months + 20Mlb/12 months) is greater than 2 occasions that large because the impression of the Cigar Lake Uranium mine flood in 2006 (18Mlb/12 months of manufacturing that had been deliberate for 2010 again than had been momentary misplaced as a result of flood in 2006), and now we are able to add the surprising lack of 4 to five million lb of manufacturing in 2023 to that.

For data on that that, I check with my submit of 19 days in the past: https://www.reddit.com/r/SqueezePlays/feedback/10sllud/as_if_the_already_existing_global_uranium_supply/

d) Every week in the past Japan introduced an vital further U-turn (in actual fact the most important U-turn within the sector) in favour of nuclear power:

Hyperlink 1: https://www.nucnet.org/information/cabinet-approves-law-to-allow-reactor-operation-beyond-60-years-3-4-2023

Hyperlink 2: https://english.kyodonews.internet/information/2023/02/913e509a7958-cabinet-formally-adopts-policy-of-using-nuclear-reactors-beyond-60-yrs.html

Why is that this an necessary U-turn?

Earlier than the tsunami that prompted the Fukushima accident in 2011 Japan had 54 large reactors that represented 1/9 of all large reactors globally at that time.

When the Fukushima accident had occurred Japan shut all of the reactors down beginning in 2011 (the final reactor was shut down in 2013). Than a number of japanees uranium stockpile was bought into the marketplace for a few years (2011-2020) and prompted the uranium worth to drecrease to unsustainable low costs for future uranium manufacturing.

So long as there was a number of uranium stockpile promoting into the market there was sufficient uranium provide at too low costs to incentives new uranium manufacturing.

Beginning in 2018 the worldwide annual manufacturing was considerably decrease than world annual consumption which helped to eat a number of the uranium stockpiles of Japan and smaller sellers.

Than in 2021 and within the first 3 months of 2022 the “consumption” of these uranium stockpiles went a lot quicker with many monetary gamers and producers/builders additionally shopping for uranium out of the market which considerably decreased the uranium stockpiles of the previous 10 years.

In Q12022 UxC (uranium guide for all of the utilities on this planet) warned western utilities that based mostly on the sector survey of finish 2021 the operational uranium reserves (stockpiles) reached essential low ranges!!

And now you will have Japan going from an necessary uranium vendor in 2011-2020 to main uranium purchaser for a lot of a long time to return, simply on the time that a lot of the uranium stockpiles of the previous have disappeared.

Now new manufacturing is required to fulfill future uranium consumption, however 55USD/lb is just too low to make a revenue for a lot of wanted uranium producers.

Based mostly on the worldwide manufacturing price curve evaluation vs the worldwide annual uranium consumption, we all know that finally 80USD/lb (and if inflation stays excessive, quickly 90 USD/lb shall be wanted) shall be wanted to get sufficient uranium manufacturing ONLINE a pair years after reaching a sustainable 80 USD/lb worth

I am a long run investor, however some buyers are questioning what the scenario is within the spotmarket, so:

B. So let me get that straight (an up to date since I posted this on twitter 3 weeks in the past):

1. Kazatomprom introduced that Kazakhstan will produce 4 to five million lbs much less in 2023 than beforehand anticipated, however the manufacturing degree in Kazakhstan of KAP, CCJ, Orano are based mostly on LT contracts => Extra uranium spotbuying wanted! + 100% of Uranium One manufacturing comes from JV’s in Kazakhstan => decrease manufacturing = much less uranium spot promoting from Uranium One. Conclusion:in all probability a further couple million kilos of uranium spotbuying coming from her + much less uranium promoting by way of the spotmarket

2. Yellow Cake shopping for 1.35 million lbs from Kazatomprom through the use of the 2022 choice, whereas the acquisition choice for 2023 (100 million USD) nonetheless stays accessible for Yellow Cake to be executed => However Kazatomprom manufacturing is predicated on LT contracts, not on non-obligatory purchases from Yellow Cake and Kazatomprom will even produce much less uranium in 2023 than beforehand anticipated, so 1.35 million kilos will most likely not come from produced uranium end2022/early 2023, however from elsewhere = extra uranium spotbuying if KAP needs to maintain their 6 to eight months operational reserve at that degree.

3. ANU Power goals to boost 500 million USD (100M in 2Q2023 + 400M by way of IPO (IPO will in all probability be in 2024) to purchase bodily uranium with from Kazatomprom. Once more, uranium that Kazatomprom must get from elsewhere (= further uranium spotbuying), as a result of their manufacturing shall be decrease in 2023 and the deliberate manufacturing degree of 2024 turned much less sure too. For example 500M USD at 62.5 USD/lb is 8 million lbs of uranium

4. The numerous U-turns (South Korea, Japan, Sweden, UK, Mexico, Diablo Canyon & different US reactors, Belgium (based mostly on 2 1000MW reactors, at the moment they discuss extending operations of 5 reactors),…) in 2H2022 added an annual uranium demand of ~10 million lb (I went by way of your entire checklist of reactors involved by these U-turns in 2H2022) that may partially begin to impression the uranium market in 2023 => the annual provide hole elevated by ~10 million lb/12 months.

5. Western underfeeding gone since 1H2022, so no secondary provide from underfeeding anymore, whereas enrichers have engaged themself in secondary provide deliveries for the future => in principle western enrichers have 2 choices: (1) purchase their share of uranium to have the ability to honor their secondary provide dedication => rising uranium demand. Or (2) Not honor the supply of that secondary provide which decreases world uranium provide in comparison with the scenario earlier than 1H2022. Consequence: Both method it ends in a further world provide hole (~20Mlb/y)

6. Overfeeding might improve world uranium demand by ~20Mlb/y too

7. U3O8 provide at the moment is predicated on LT contracts signed when the sector was in an underfeeding setting and the place everybody within the uranium and nuclear sector thought that that setting of underfeeding would stay for years to return. However shock shock, an surprising main shift from underfeeding to overfeeding occurred. That means that the extra uranium wants to have the ability to overfeed end2024/2025 and past with moreover produced UF6 in 2023 and past isn’t lined by the prevailing LT contracts at the moment! => Consequence: UF6 stockpiles throughout the gas cycle will lower considerably (adopted by UF6 restocking) + All U3O8 delivered at the moment by way of these current LT contracts however used at the moment (UF6 manufacturing at the moment for overfeeding end2024/2025) for the overfeeding a part of EUP manufacturing will lower the U3O8 accessible from these current LT contracts for EUP manufacturing exterior the overfeeding half (see decrease instance *) + vital improve of uranium spotbuying (As a result of a pure uranium producer plans his future manufacturing degree based mostly on signed LT contracts and may’t improve manufacturing in 6 months time. More often than not it takes years to considerably improve manufacturing after signature of LT contracts) => Consequence: part of the extra uranium demand in 2023/2024 from the lack of underfeeding (~20Mlb/y) & from the beginning of overfeeding (additionally ~20Mlb/y) will a technique or one other need to be provided with out LT contract overlaying that provide => far more uranium spotbuying coming and probably purchases of uranium stockpiles of $DNN (2.5Mlbs) $UEC (complete stockpile: ~3Mlbs by in 2023, 5Mlbs by finish 2025) $URC $UUUU (<1Mlbs) (However they won’t promote a big a part of their bodily uranium at 60USD/lb. Neglect that. 80USD/lb uranium worth, welcome)

8. China has an enormous uranium provide insecurity!! China solely has 7 very small mines domestically that collectively solely produce ~5Mlbs/y. They’re constructing a strategic reserve on the border with Kazakhstan (Alashankou Uranium Bonded Warehouse) with a storage capability of 23,000 tU (= 60 million lbs). What do you suppose will occur with that storage if a battle with Taiwan begins? They may fill it as rapidly as doable & preserve it fully for home consumption! They’re already filling it with the primary supply + signing brief time period provide contracts (CNNC shopping for 26% of of 2023-2025 manufacturing of Langer Heinrich, …)

9. Carry merchants with multi 12 months provide contracts signed in 2020 for supply in 2021-2024. How a lot of these contracts nonetheless exist? Do not forget that in 2021 carry merchants bought some uranium stockpiles to SPUT whereas uranium spotprice was larger than uranium long run worth, pushing carry merchants to exchange that bought uranium with new uranium provide sooner or later. Most of it is going to most likely be uranium provide by way of multi-year contracts with producers, however a small half may very well be by way of uranium spotbuying in 2023/2024.

10. Many current LT contracts with utilities have a contracted non-obligatory provide on high of the mounted LT provide. When overfeeding hits the utilities, all these utilities with a contracted non-obligatory provide will activate that choice asking their suppliers (producers) to ship extra uranium than the mounted LT uranium provide. However did producers cowl 100% of this non-obligatory demand with current manufacturing? I doubt it, as a result of producers have additionally been stunned by that sudden shift from underfeeding to overfeeding. Consequence: If this non-obligatory demand is not 100% lined with current manufacturing, these producers must discover uranium from elsewhere (uranium spotbuying from producers) to have the ability to honor 100% of this non-obligatory demand.

11. What is going to Sprott Bodily Uranium Belief purchase within the spotmarket in the course of the remaining 11 months in 2023? (February 15,2023: They simply elevated their ATM with a further 1.3 billion USD capital increase capability)

(*) instance: LT contract 900,000lb/y signed in 2020 good for 12 months of consumption of two 1000MW reactors earlier than shift occurred. If in 2023 they use part of these 900,000lb for overfeeding, these 900,000lb won’t be sufficient for 12 months of consumption anymore, however just for 10 months of consumption.

So okay, let’s take a conservative (imo) situation in regards to the 2023 impression on spotmarket:

1. 4 to five million lb much less produced in 2023 ~> 60% impacting uranium spotmarket = 2.5 million spotbuying + 0.5 million much less spotselling from Uranium One

2. Yellow Cake 1.35 million lb buy comes integrally from uranium spotbuying

3. 100M ANU Power ~2Mlb comes integrally from uranium spotbuying in 2023, whereas the remaining 400M ANU Power ~6Mlb comes 33% (= ~2Mlb) from spotbuying and 67% from Kazatomprom manufacturing in 2024

4. U-turns in 2H2022 solely partially impression the uranium market in 2023. Let’s fake this doesn’t impression the spotmarket however 100% the time period market (LT contracts)

5. Underfeeding gone = 20Mlbs/y much less provide or a further 20Mlbs to be purchased by the western enricher ~> An thought: Western enricher swaps current secondary provide from underfeeding that doesn’t exist anymore with a brand new U3O8 supply that the enricher purchased in order that the operational reserve of the utility/consumer stays on the “identical degree” => U3O8 partially purchased in spotmarket, let’s fake solely 25% of 20Mlb in 2023 is purchased within the spotmarket = 5 million lbs

6. Preparation for overfeeding: ConverDyn restart in 2023 = UF6 manufacturing will increase in 2023 = U3O8 consumption will increase in 2023, however with out being lined by LT contracts => 30% lined by operational U3O8 reserves lower (adopted by U3O8 restocking) and 30% by spotbuying (= 6Mlb in 2023). (For 2023 I preserve the remaining 40% of these ~20Mlb apart as a result of the impression of overfeeding solely begins in 2023, and can most likely improve in the direction of 20Mlbs/y after 2023).

7. Be aware: all the doubtless decreases of operational U3O8 reserves in 2023 must be crammed with new U3O8 once more in 2024. So in 2024 the impression of overfeeding shall be a lot greater

8. China is shopping for a number of brief time period and long run uranium provide. Buyers don’t discover it simply, however it’s taking place (takeover of 68% of Rossing mine in 2019 (earlier than the takeover 25% of Rossings manufacturing was bought by way of the spotmarket, at the moment that a part of the uranium manufacturing goes to China too), CCJ, Kazatomprom, Orano, now Paladin Power (26% of 2023-2025 manufacturing), subsequent? World Atomic, greater share of manufacturing of Langer Heinrich (Paladin Power) going to CNNC? Ultimately, if obligatory (in the event that they need to act quick) China will knock on the door of Uranium One as an example and pay them “100USD/lb” for his or her manufacturing as an alternative of Uranium One promoting by way of the spotmarket. Ukraine, Taiwan, anybody?

9. Carry merchants: Let’s fake this doesn’t impression the spotmarket however 100% the time period market (LT contracts)

10. Let’s fake that 100% of non-obligatory demand is roofed by current manufacturing, which means that no further uranium demand shall be purchased by these producers, however these producers may have much less uranium going into their operational reserves. All uranium spotbuying from producers as a result of overfeeding is a part of the potential uranium spotbuying as a result of overfeeding below level 6

11. Between January 13, 2023 and February 2, 2023 Sprott Bodily Uranium Belief already purchased 1,276,847 lb in 2023. Between February 6, 2023 and February 15, 2022 Sprott Bodily Uranium Belief purchased a further 700,000 lb, whereas nonetheless having 42 million USD money able to purchase extra

Whole conservative spotbuying (or much less spotselling) in 2023 with knowledge at the moment: 2.5M + 0.5M + 1.35M + 2M + 5M + 6M + (1.276M+0.7M) = already 19.326Mlb in comparison with 25Mlb of world complete annual manufacturing being bought by way of the spotmarket earlier than the shift. Okay, so on February 15, 2023 we already discovered a purchaser for ~75% of these 25Mlb in 2023 (25Mlb may very well be considerably much less at the moment) + a pair 100k lbs of 2022 manufacturing that waited on the sideline when SPUT wasn’t lively.

Now look again in any respect the potential further uranium spotbuying I left apart whereas making that conservative situation:

1. Kazakhstan manufacturing loss: 40% = 2Mlbs

2. YCA: Choice of 2023: 100million USD ~> 1.7Mlbs at as an example 58.82USD/lb

3. ANU Power: 4Mlbs in 2024

4. A small a part of the extra annual 10Mlb/y demand impacts the uranium spotmarket (instance 1Mlb)

5. Underfeeding gone: 15Mlb

6. Overfeeding end2024/2025 impacting U3O8 shopping for in 2023: No operational reserve decreases, so further 30% (not going to make use of 100% as a result of conversion solely regularly will increase and never beginning on January 1, 2023) by way of spotbuying = 6Mlb

7. The extra operational U3O8 reserves lower in 2023, the extra U3O8 restocking in 2024

8. China orders to speed up the uranium shopping for in 2023/2024, if tensions round Taiwan begin to improve, and if not sufficient uranium is accessible on time they may go to the spotmarket

9. Carry merchants being partially uncovered for his or her current multi 12 months provide contracts to utilities (instance 1Mlb)

10. Not 100% of non-obligatory demand is roofed by current manufacturing, which means producers will purchase some further uranium within the spotmarket (instance 4Mlb). All uranium spotbuying from producers as a result of overfeeding is a component of the potential uranium spotbuying as a result of overfeeding below level 6

11. Sprott Bodily Uranium Belief shopping for on common 500,000lb or a pair million lbs uranium within the spotmarket per thirty days (instance 1: 1.5Mlb in February + (500,000lb x 10 months) = 6.5Mlb / instance 2: 2Mlb in February + (1.5Mlb x 10 months) = 17Mlb)

Whole further uranium spotbuying left apart in my conservative situation: 2M + 1.7M + 1M + 15M + 6M + 1M + 6.5M to 17M = 33.2Mlb to 43.7Mlb

You solely want a really small half (6 to 7Mlb) of these 33.2Mlb to 43.7Mlb to additionally impression the uranium spotmarket and ALL uranium produced in 2023 uncovered by LT contracts (~25Mlbs/y + couple 100k lbs of 2022) would have been purchased and brought out of the market!

A pair examples (*):

(*) These examples had been written 2 weeks in the past. And a couple of weeks later we see that the scenario developed like expressed in these examples concerning the spotbuying and spotbuying energy from SPUT in February 2022)

i. If SPUT solely buys a further 800,000lb in 2 final weeks of February 2023 (they nonetheless have 42 million USD money at the moment) and 0lbs in coming 10 months, YCA doesn’t activated their 2023 buy choice and the overfeeding doesn’t trigger a further uranium spotbuying, however the lack of underfeeding causes a 11Mlb spotbuying in 2023 as an alternative of 5Mlb within the conservative situation, than ALL uranium produced in 2023 uncovered by LT contracts may have been purchased!

ii. If SPUT solely buys further 800,000lb in 2 final weeks of February 2023 and 0lbs in coming 10 months, YCA doesn’t activated their 2023 buy choice and the lack of underfeeding doesn’t trigger extra uranium spotbuying than the 5Mlb within the conservative situation, however the overfeeding causes a 12Mlb spotbuying in 2023 as an alternative of 6Mlb within the conservative situation, than ALL uranium produced in 2023 uncovered by LT contracts may have been purchased!

iii. If SPUT solely buys further 800,000lb in 2 final weeks of February 2023 and 0lbs in coming 10 months, YCA doesn’t activated their 2023 buy choice, the overfeeding doesn’t trigger a further uranium spotbuying and the lack of underfeeding doesn’t trigger extra uranium spotbuying than the 5Mlb within the conservative situation, however China orders to speed up the construct out of their strategic operational uranium reserve in 2023 at their Alashankou Uranium Bonded Warehouse (instance: shopping for the remaining 2.35 Mlb Langer Heinrich manufacturing of 2023, stopping Rossing to promote even a bit within the spotmarket in 2023 and shopping for 5Mlb in spotmarket in 2023), than ALL uranium produced in 2023 uncovered by LT contracts may have been purchased! Be aware that the Alashankou Uranium Bonded Warehouse storage capability would improve from 3000tU in 2021 to 13000tU in 2023. 10,000 tU = 26 million lb of further storage capability in 2023.

iv. If SPUT solely buys further 800,000lb in 2 final weeks of February 2023 and 400,000lbs/month on common in coming 10 months, YCA doesn’t activated their 2023 buy choice, the overfeeding doesn’t trigger a further uranium spotbuying and the lack of underfeeding doesn’t trigger extra uranium spotbuying than the 5Mlb within the conservative situation, however the 4 to 5Mlb lack of uranium manufacturing in 2023 causes a 5Mlb spotbuying in 2023 as an alternative of 3Mlb within the conservative situation, than ALL uranium produced in 2023 uncovered by LT contracts may have been purchased!

v. If SPUT solely buys further 800,000lb in 2 final weeks of February 2023 and 600,000lbs/month on common in coming 10 months, YCA doesn’t activated their 2023 buy choice, the overfeeding doesn’t trigger a further uranium spotbuying and the lack of underfeeding doesn’t trigger extra uranium spotbuying than the 5Mlb within the conservative situation, than ALL uranium produced in 2023 uncovered by LT contracts may have been purchased!

vi. In case you mix 20% of the 5 earlier examples (making 5x 1.3Mlbs further uranium spotbuying all 5 collectively), than ALL uranium produced in 2023 uncovered by LT contracts may have been purchased!

Nicely, okay than 😀 See you considerably larger

$U.UN, $U.U and $SRUUF

Sprott Bodily Uranium Belief (SPUT) (U.UN on the TSX and SRUUF on US inventory alternate) is an 100% funding in physica uranium (no uranium on paper!) with out being uncovered to the mining dangers

U.UN share worth at 17.65 CAD/share represents an uranium worth of ~52USD/lb, whereas transactions above 60USD/lb and even already at 70USD/lb are occurring at the moment.

Right here a hyperlink to a latest firm replace with 12 month worth goal for Sprott Bodily Uranium Belief: https://mobile.twitter.com/quakes99/status/1599475875153870848

With a market going from threat off to an increasing number of threat on once more in coming months, I count on Sprott Bodily Uranium Belief to purchase considerably extra kilos than 500,000lb/month in coming 10 months with the help of the flywheel impact from URNM etf and URA etf

Be aware: the FED raised charges from 2004 til mid 2006 as effectively:

Supply: https://www.federalreserve.gov/econresdata/notes/feds-notes/2015/effects-of-fomc-communications-before-policy-tightening-in-1994-and-2004-20150924.html

Fyi. The uranium spotprice went parabolic from 2006 til mid 2007

This isn’t monetary recommendation. Please do your individual DD earlier than investing.

Cheers