Uranium Gaining Traction, but Experts Say Patience Still Needed

Uranium sentiment changing for the better

At several panels, Rick Rule, head of Rule Investment Media and a revered figure in the resource industry, hammered home the notion that perspectives are shifting around the world when it comes to uranium.

Nick Hodge, co-founder of Digest Publishing, publisher of Daily Profit Cycle and founder of the Hodge Family Office, told the audience at VRIC’s uranium forecast panel that the biggest catalyst for uranium is renewed broad acceptance.

“The narrative is shifting on uranium and nuclear stocks,” he said.

As attitudes toward uranium change, and as plans for new project plans emerge, investors are curious to know how they can get exposure to this trend, and the experts at VRIC shared their advice on what to do.

All panelists declared that they are bullish on the sector over the next decade, but Rule urged some caution, saying uranium equities are already pricing in higher levels for the energy fuel.

“If you look at the price of uranium equities, it assumes a premium to the current spot price of US$50 a pound,” he said.

Is there too much hype in the uranium market?

During the cheekily named "How to Make Boatloads of Cash (and Keep It) in Uranium Stocks" panel, the expert participants were asked what point the uranium bull cycle is at right now.

Hodge answered by indicating that uranium is still in the early days of a potential run.

“The price of uranium still hasn’t gone where it needs to go,” he told the audience, adding, “I think there’s a long road to go to fill the supply gap that is going to emerge in the coming years."

Rule told the audience that there's a lot of hyperbole in the sector, but the thesis remains strong.

“I believe that the total cost of producing a pound of uranium … is above the current cost of production, which means either the price rises or the material becomes unavailable,” he said.

The expert added that he believes that a “substantial production deficit" will create opportunities in uranium. In his opinion, the market is entering a stage where total global demand will be higher than it was before the catastrophic Fukushima event in 2011, which badly affected uranium buying as well as overall sentiment.

For his part, Warren Irwin, president and chief investment officer at Rosseau Asset Management, expressed strong concern about the number of projects coming to market given the price conditions for uranium.

The expert warned of hype in the sector and suggested that investors monitor demand for uranium. He pointed out that it takes time for nuclear reactors to come online, meaning they won't become consumers quickly.

“I think right now we’re in the wishful thinking stage where everybody wants the uranium market to run. The whole mining sector is turning here, and there’s a lot of people hyped up about uranium. I don’t share that enthusiasm,” Irwin said.

Be wary when picking uranium stocks

When discussing options for picking names in the junior space, Irwin told investors not to rely too heavily on these names for long-term investments, sharing his own personal losses as difficult learning lessons.

Irwin asked Rule for an estimate of how many uranium juniors exist, to which his fellow panelist gave an estimate of around 75. Irwin said investors can use the number of uranium companies as a way to monitor overextended hype in the space.

“Trust me, the world does not need 200 uranium juniors,” he said.

Hodge told audience members they should not be afraid to sell when the time is right, especially in uranium. He said at times taking gains and knowing when to move out of a position can be a better bet than holding in the long run.

Investor takeaway

When exactly the uranium market will take off remains to be seen, but there's a broad consensus that momentum is shifting in the sector. Investors looking for ways to get exposure to the narrative will need to choose stocks carefully, especially if improvements in the market create a rapid expansion of junior miners to pick from.

All in all, experts agree a turnaround for uranium is brewing, but is still in an early stage.