David Cates: Welcome to The Uranium Supercycle
David feels that uranium has made a move toward rationality, although he warns it still has a long way to go. There is now real price movement, volume and thus benefits to price discovery. What is exciting about the long bear market, is the detrimental effect it had on the uranium industry. There are very few good uranium projects out there. When utilities go looking for supplies there will be a real pinch, they won’t be able find any.
He believes that 2017 is similar to the beginning of the last commodity super cycle of 2004, which was largely driven by China. China is looking to expand their clean nuclear industry with upwards of 200 reactors from the current 35. China will therefore become the largest consumer of uranium, he thinks this is the beginning of a uranium super cycle. David is very excited about the speculative potential in the coming market.
David discusses how there are no uranium mines in the world that can make money at the $18.00 level and why it made sense to call that as a market bottom. He says $40 dollar uranium looks to be the necessary price for production to begin. In the longer term, going out to 2025, prices will need be a lot higher.
KazAtomProm is discussed, how their recent production cuts and restructuring to a more commercial business style from a state run industry is benefiting the uranium market. Mr. Cates details underfeeding which is a reference to the enrichment process and how it can dramatically affect the supply and thus the price in both good and bad markets. Unlike oil and gas which takes days, uranium mines require five to ten years to begin production.
He discusses Denison Mines and their interest in GoviEx in Africa, how they have a good resource base and how it could become a billion dollar company. Denison is very well capitalized having recently raised 20 million in financing and and has the flexibility to do what will be needed.