Palisade – Sprott Monthly Market Update with Rick Rule: Uranium Is Nearing The Bottom
In part two of our monthly market update, Rick discusses the recent volatility in Uranium markets and how to think about these investments in the years to come. He believes that the recent fall in Uranium from $30 USD a pound to $18- and the recovery thereafter were fake numbers. Until we begin seeing restarts in Japan, we’re not going to see much health in the underlying commodity.
The price will likely remain weak in the near term until the restart occurs, and the recent volatility in uranium markets is simply noise- as the movements were in very little volume. If however the restarts do not occur, then that inventory would be available to a market that remains weak in demand. They delve deeper into a potential Japanese restart which could take a very large amount of inventory off the market, and how this would drive a bull market.
According to Rick, the big opportunity is in the inevitable growth in demand, which is driven by North American power plants and the need to ‘keep the lights on’. The industry is very capable of paying higher prices for uranium and thus likely will. He goes into some of the psychological dynamics at play in the markets, their effects on the prices, and how they differ from other commodities. Historical trends in uranium juniors are also discussed. Rick explains what they’ll have to do to survive and be well positioned for the end of the low prices. From his 40 years of experience, he feels success is likely.
He warns that investors should have clear expectations about the time frames involved, and explains how he sees them. In particular, the time needed for a recovery in the true fundamentals of juniors is more important then the market perception of it. Rick shares his analysis of how to play established uranium deposits versus exploratory endeavors when the markets are in disarray. He also goes into the managerial tendencies of teams with private placements and how to best strategize your investments.
Talking Points From This Week’s Episode:
•The fall in Uranium prices from 30 USD a pound to 18 USD were false numbers that happened on very low volume.
•A Japanese reset would take a very large amount of inventory off-market, which could start the bull market.
•Demand from North American power plants is inevitable, and they’re capable of paying higher prices.
Rick Rule began his career in the securities business in 1974.. He is a leading investor specializing in mining, energy, water, forest products and agriculture. Rick founded California-based Global Resource Investments, Ltd., which grew into a much larger organization with significant affiliated companies. As Director, President, and Chief Executive Officer of Sprott US Holdings, Inc., Mr. Rule leads a highly skilled team of earth science and finance professionals who enjoy a worldwide reputation for resource investment management.