VIDEO — Warren Irwin: Uranium Supply, Demand and Prices — Contrarian Takes
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Resource investors are giving uranium a lot of attention, but one expert is warning against overly rosy outlooks.
Warren Irwin, president of Rosseau Asset Management, said that with demand set to grow slowly and adequate supply poised to come online at the right price levels, the market is unlikely to see the major moves some have predicted.
"One thing is for sure — there's enough uranium out there. If prices get significantly higher, there's enough out there that can be put into production to satisfy any gap in the supply/demand equation," he said.
Looking first at demand, Irwin said there is an install base of 450 nuclear reactors, with an estimated 50 others under construction. If those 50 come online in the next five years, that amounts to 10 per year for about a 2 percent increase in demand annually.
"We're talking low, low single-digit growth in demand," he said. "That's reality. Nobody can change that."
In terms of supply, Irwin pointed out that over the last seven years there's been a uranium supply deficit of 50 million pounds or so — demand of 180 million pounds has been met with mine supply of only 130 million pounds. However, every year that 50 million pounds has managed to appear from other sources. In addition to that, buyers like the Sprott Physical Uranium Trust (TSX:U.UN) and Yellow Cake (LSE:YCA,OTCQX:YLLXF) have snapped up another 70 million pounds of the material.
Beyond secondary supply, he said that in the last two months he's seen "projects with drilled out resources of well over a billion pounds of uranium ready to go into market as soon as prices get a little bit higher." Thus far, the demand isn't there.
Irwin did outline one scenario that could push uranium prices much higher than he envisions them going.
"How I could be proven wrong is if some big hedge fund guy out of the US with a $30 billion hedge fund throws a few billion dollars at the Sprott Physical Uranium Trust or Yellow Cake, or decides to even buy the uranium on the spot market themself — ramping up the price of uranium to US$120 a pound," he said. "All the juniors run, and then that big hedge fund sells all the juniors into the market back at unsuspecting investors thinking that US$120 is actually justified."
Watch the interview above for more from Irwin on uranium supply, demand and prices. You can also click here for the Investing News Network's full Vancouver Resource Investment Conference playlist on YouTube.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
