Speaker 1There is not enough economically viable uranium to satisfy the world's existing reactor fleet of 440 operating reactors, of which a little over 420 are actually producing electricity, and the pipeline of 80 new reactors coming online.
Speaker 2That was Sachem Cove Chief Investment Officer Mike Alkin. I'm Eric Townsend, and this is Macro Voices, the free weekly podcast targeting professional finance and sophisticated private investors. Episode 558 was produced on November 12, 2026. Uranium prices are moving up as more and more fuel buyers recognize the structural bull market has legs, but uranium mining shares are being dragged down as investor sentiment collapses into fears that the AI capex boom will go bust in the wake of the blue tsunami and Democrats' threats to make AI and data centers public enemy number one. The uranium bull thesis has nothing to do with AI or data centers and doesn't rely on them for future uranium demand. But the market is the market, and fundamentals notwithstanding, the street has lumped all things nuclear into AI and data center baskets. So we're bringing back the number one fund manager in the uranium sector to discuss this crossroads of investor sentiment and the mining shares crashing to liberation day lows, just as the fuel buyers are all turning bull. lows, just as the fuel buyers are all turning bullish on uranium prices. Mike shared his slide deck from the recent NEI Nuclear Fuels Conference with us as well, and you'll find it linked to your Research Roundup email. Unfortunately, we didn't get to most of the slides in the deck because we ran out of time talking about issues affecting sentiment and the fundamentals of the trade, but I strongly encourage listeners to download and peruse the deck as well. And I'm Patrick Ceresna. Let's dive straight into this interview. Joining me now is Mike Alkin, who, of course, is founder and chief investment officer at Sachem Cove Capital Management, probably the most respected uranium-focused fund manager there is. I'd say, Mike, it's really what, you and Art Hyde at Segra and Guy Keller at.
Speaker 1Yeah, those are the three, Eric. Me, Art and Adam over at Segra, and Guy in Australia are the three that have. And then there's some others, but it's not their core focus.
Speaker 2It's great to get you back on the show. I think that right now we are at an incredibly important point in this uranium market because the fundamentals couldn't possibly be better. But you and I both know this trade, despite that the fundamentals don't really dictate it, gets basketed with AI. And we are feeling incredible pain from fears of the AI capex boom blowing up. Before we get to the slide deck, let's just get your overall view on it. First of all, does it make sense to tie the fundamentals of uranium prices to AI capex? A lot of people are associating nuclear energy with AI and AI data centers. Does that make sense on a fundamental level? And if it doesn't, is the market doing that anyway? And what does that mean for our investments?
Speaker 1I'll answer the second part is yes, the market is doing that. The first part of the question is it does not matter. You know, there, at the end of the day, I've been investing in the uranium trade, if you will, you know, for almost 10 years now. And we expressed our view with our vehicle. Starting back then when uranium prices were $17, $18, $19, $20 a pound. And, you know, they're pushing 100 plus now. The thesis is very simple. You know, nothing's changed. And as you know, Eric, as being an investor. When things change, if your thesis changes, then you have thesis creep. Here, that's not it. What we've had is the thesis is very simple. There is not enough economically viable uranium to satisfy the world's existing reactor fleet of 440 operating reactors, of which a little over 420 are actually producing electricity. And the pipeline of 80 new reactors coming online. And then the growth of those. And when this trade first started, it was a nuclear was maybe. It was a half percent grower. And now it's a four to five percent grower. None of that has anything to do with data centers, artificial intelligence, the growth of artificial intelligence, what models are profitable, what models won't be profitable. If a data center didn't open, there is still a massive structural deficit in uranium. And we can get into a market structure. But so, no, it does not matter. Now, it matters because the market thinks it matters. So, as a PM, you have to be aware of what the market thinks. So, as a PM, you have to be aware of what the market cares, right? Because the market can remain irrational for a long time. But you've seen over the last few years, and by the way, some of these uranium junior mining companies are as guilty as anyone because what they do is take the view, you know, when you see Three Mile Island being restarted or you see a power purchase agreement between a hyperscaler and a nuclear power plant. All of a sudden, people start to equate that with uranium being necessary for artificial intelligence and a revitalization of nuclear power is becoming. And because of that, it's absolutely nothing to do with it. However, you know, never let a good story get in the way with the facts is how some people operate. So, what you see is they start showing up in all of these different presentations is, you know, hey, we're part of the AI trade. We're part of the data centers and the revolution that's taking place there. Well, be careful what you ask for because now, all of a sudden, people start looking at it saying, well, is this CapEx going to be spent? And there's a real good reason to question all of that. Is CapEx being spent? Well, then you get lumped in. And where do you get lumped in? You get lumped in at the banks. When the Goldmans and the Morgans and everyone else puts these baskets together, right, as you know, it's easy to express a trade through a basket. Client calls up, says, I'll take the AI basket, the momentum basket, whatever the basket is, nuclear gets lumped in with that. So, what winds up happening is it becomes facts be damned, it becomes flows. And so, when the flows are moving one way, it's hard to stem that tide. And it has gotten caught up into the artificial intelligence data center basket. Now, at the end of the day, we think there are structural deficits, and we'll talk about this in a deck, that are, you know, reaching into the 15, 20, 25 plus percent of demand for as far as the eye can see. But in the day-to-day, nobody cares, right? So, if people are freaked out because rates are moving up and they're thinking these are long-lived assets and that they don't know what the cost of building a mine is going to be, and you've got AI baskets and you've got announcements where data centers are being delayed, not in my backyard, all that stuff. Or the Dems are taking off. They're going to really. These things get shot. And so, it's part of it. You just have to figure out how to manage around that.
Speaker 2Mike, let's dive into how you manage that because something I'm seeing is a real dichotomy. Some of the people that I respect in the uranium trade are saying, look, Cameco just had this earnings call, which was understandable. Cost of mining is going up. Their costs are going up. They missed some earnings. Big deal. The price of uranium is going up, too. The outlook is great. They're selling spot. So, they're selling spot. They're selling their exposure to the metal in order to buy the miners because they perceive that it just can't get any worse than this. Other people are saying, wait a minute. This AI CapEx fear thing, even if it doesn't make sense, could take those miners down. I'd rather own the metal than the miner, and they're going the other way. They're selling Cameco to buy spot. Which one makes more sense?
Speaker 1So, it's a fabulous question. You know, you're dealing with a few things. Number one, let's start with the premise that mining is hard. And mining is very hard across commodities. Uranium mining has turned out to be exceptionally hard and exceptionally more expensive. And as we're going to talk about, I'm sure, the cost to mine has become extraordinarily expensive. And your listeners will see this in a deck. But just to wrap a little context around it, Kazatomprom, the state-owned entity of Kazakhstan, the world's largest uranium mine. The world's largest uranium producer. Kazakhstan is 41% of global uranium supply. The state-owned company is half of that. The rest is through joint ventures that are out there. They came public 2018, 2019. And at the time, in their prospectus, they put a forecast out. And they suggested that their price by 2026 would be about 14 bucks a pound, 13, 14 bucks a pound. Right over, a little bit lower than where it was at the time. And you fast forward, and that was using a Tenge of 3/4. They cost in Tenge, sell in dollars. So a weaker Tenge really is a margin boost for them. Well, fast forward to today, so where they were predicting in the $14 range, today their cost is $38.45 per pound, not 14. And if you were to normalize the FX to the 3/40 Tenge versus the 450, 75, 500 Tenge that it had seen for a bulk of the time, you're looking at over $55 a pound. And so, but what winds up happening from that is a couple of things. And having been around this investment now for this sector for 10 years, I can't emphasize enough how difficult it is to mine uranium. I can't also emphasize the scarcity value that should be placed on those that can do it. And so I understand some people, like you mentioned earlier, the call, you're seeing the cost going higher. And so the quarter is not good. First of all, Cameco is giving annual guidance. They're not updated. They don't update on a quarterly basis. But what you see is as these costs are going higher, so too is the price of uranium. So you're seeing significant increases in the price of uranium because the miners can't sell the capacity they have at the prices that the utilities would like to buy it. So now, here we go. You asked, how do you play it? Do you play it through the miners because they're extraordinarily cheap, some would argue, or do you play it through the metal? That's an individual risk tolerance, right? Because what we have seen, and you will see this in the deck, is project after project is massively missing the supply that they have promised when they were in the development stage or in the production stage. And we're not talking by a little bit. We're talking by a significant amount. You're talking prices that have gone up anywhere from 80 to 90 to a couple hundred percent higher than they suggested it would be. You're looking at production targets that are down by 50, 60. You're looking at 70 percent. And so that, the moment you own a company that is subject to that, right? So their numbers are going to change. But overall, in the totality, that lack of production is just putting a significant more pressure on what's already an undersupplied uranium market. And so you have a structural deficit. There's not enough economically viable mine supply out there at these prices to bring it on. You've got a couple of new big projects coming online. It's still doesn't solve your deficit. And so it's, it bodes extremely well for price formation. The risk you take is you happen to own one of those miners that, that trips. And the history, the last few years is one after the other is either doing it on production or cost. And so again, ultimately what's happening is the prices are rising materially because of that. And so that ultimately will accrue to them. And there's not, that's not in encouraging the prices where they are, even though the term market, which we'll talk about the, that the importance of that, but that's where the bulk of uranium trades is, is literally at an all-time high right now. And so now if someone wants less risk, then they would express that through the physical commodity because you don't have mining risk and mining risk is real. Now, what needs to go into the calculus, I would argue for someone who is more inclined to own the equity to get the torque. Is to understand those that do mine and those that can mine, how good have they been at it? Because there should be a real scarcity value that's placed on that. And again, that's, that's art, not science, right? Now, what got lost in the Cameco release is, and price reporting here is a unique beast. The price that's reported in many instances is not where the price is trading. And so, right, the fixed price contract is 98, $99 a pound right now, Cameco said it on the conference call, they're getting triple digits. So how is that possible? How are the price reporters not seeing that? Well, they are, but the way the price reporting is set up in the industry is they don't take where the price was contracted. They price where the lowest offer came in on a contract that they've heard about. So if somebody came in below where Cameco was saying they're signing in the triple digits, even though that utility gave it to Cameco, the price reporter is pegging it to where they found the lowest offer. And what's their, what's the price report? What's the price report? And what's the price report? And absolutely absurd explanation for it, because at the end of the day, the geopolitical risks are staggering here, right? When you look at where the uranium is produced and where the uranium is consumed, 70% of it is produced in the East and yet 70% is consumed in the West. And there are massive deficits in the West and not deficits, but a little bit of surplus in the East, but that goes programs, the Chinese programs, the Indian programs. So anyway, the point is on Cameco's call, that was a really important thing. If you've listened to them like we have for a decade to the Cameco calls, they don't even discuss the numbers. When I first started listening to them a decade ago, I said, am I missing something? They don't even talk about the quarter. And so that is just the nature of that business. So their misses, costs are up, yes. Sometimes people will say, well, with Cameco, well, they don't have full spot market exposure, so their prices will lag where the market is. Okay, in a rip-roaring market, people get excited, they get exercised about that, but also prices go up or down. And there are times where as contracts roll off, they're signing it to higher prices. But to get back to your original question, it really comes down, can you make an argument? So let's just do this math. 2022, Cameco invests in Westinghouse for their 49%. And at the time, Cameco, the price of uranium, the contract price was around 49 bucks a pound. And Cameco is trading about 31 times EBITDA. Fast forward to today, that contract price, that the price report is 98 or 99, but it's well north of 100. So it's more than doubled. And depending on what one wants to assign the value to Westinghouse, pick a number, but if you put a reasonable assumption on it, Cameco is trading like eight or nine times EBITDA. That's stupid, in my view, for the Western world's dominant uranium producer. And there's no one close that's producing uranium right now that can produce like them. So do they have a hiccup once in a while in a quarter? Sure. Who doesn't? But for their place in the landscape, I think that the market overlooks that. But what happens, you put out a press release and they don't even guide, they had a delay for a couple of, you know, a few weeks at the mine, and all of a sudden it's a miss. And as you know, the algos pick up, headline, miss, and good night, you know, you get shot on that day. Those who have a lower risk tolerance, but want to express the view that uranium prices, if they do the work and they get comfortable that the thesis makes sense and uranium price formation is just really beginning and it needs to move significantly higher to satisfy these structural deficits, and you have a low risk tolerance, perhaps the physical metal is the way to go. If one is inclined to say, my gosh, here we are with a massive move up in the physical price, you know, your prices have gone from 17, 18 bucks a pound to over a hundred, and ceilings on certain contracts are in the 150s plus, yet these equities have pulled back significantly just in the last few months, and valuations are back to where they were, even valuations four or five years ago, when there was no certainty, not that there's certainty now, but there was a lot more clouds around the future of the nuclear power industry. And so, you know, there's a lot of uncertainty around the future of the industry. Back then, the trade was prices can't stay this low, they got to come to a certain price. Nobody factored in nuclear power growth going from half a percent to 5%, and here we are. So, yeah, it just depends on what one's risk tolerance is, but you can make a case for either
Speaker 2one. Let's get into the NEI conference that you just attended and the slide deck that you prepared for that conference. Before we dive into the slide deck, though, there's something I find absolutely fascinating, which is you've been attending the NEI conference for a long time, this conference for years and years and years. You were ridiculed, in some cases treated very disrespectfully on a personal level, as the nutcase guy who's bullish on uranium when the people in the business who know better disagreed with you, and you were kind of laughed out of the room. Now, that was when uranium was 20 bucks a pound, now that it's five times more. I asked a lot of people, I've been asked by Zero Hedge to organize a debate on this topic. I need you to recruit one of these angry uranium bears who thinks you're an idiot. Let's get them signed up for a debate. And there's plenty of those. I thought there was plenty of those. A lot of people that think you're the idiot and they're bearish, they're saying this is just a 2007 Cigar Lake thing. It's all going to blow over. Prices are going back down. Recruit one of those bears to do a debate, and we can get this conversation going. Now, to hear the other side of the story. Mike, you had one job and you failed.
Speaker 1What happened? I failed miserably. You know, just for some background, right? So, I didn't know uranium from anything. I looked at it a couple of times in my career at different points, but never invested in it. And then 2015, 16, started stumbling upon it. And 17 and 18, doing deep research and, you know, it was asymmetric. It made sense. And so, and expressed the view through an entity. At the time 2018 came around and the vehicle was up and running, I was, learning the market structure. And Eric, I don't think by that point in time, and I'm, I'm forgetting 20 something years, probably had been investing by then. And I don't think I appreciated really market structure and the power of incentives. I knew about them. I paid a little attention to them, but I don't think I truly had a profound, really deep understanding of what that all meant. And just to give some background, I think it's really important because it will help contextualize why I couldn't find anyone.
Speaker 2I was. Well, let's just get the fact on the table. You went to the conference to find the bear. And what you found is there were no bears. Everybody at the conference was bullish. And of course, it's not because of you told them that over and over again for the last five years. It's their idea now.
Speaker 1No, and they think I'm an idiot. So they told me in 2018, go home. You don't belong here. We're nuclear engineers. We buy stuff. You don't know anything. And they told me the same thing in 2019, 2020, 2021, 2022, 2023. And the bet always at these conferences was pricing. If it was $20, it was going to $10. If it was $30, it was going to $20. If it was $40, it was going to $30. It wasn't really until prices got into the 80s would a fuel buyer sit down with me at a conference and say, okay, all right. Maybe it's not going back. It's going to $30 or $40, but it's going to $50. Okay. And then, you know, as you get into the 90s, it's like, okay, well, so maybe it gets to $100, but then it's going all the way back. Okay, great. I'm wide open to it. I've laid my cards out on the table. I've told you everything. I put together decks. I've spent immense amount of time talking, presentations, and everything about it. I've laid out all the math, the supply, the demand, the inventories. None of this is my business. None of this is my data. It's publicly available. My team and I have spent tens and tens of thousands of hours tearing it apart and trying to understand it and see where we're wrong. Every day we assume we're wrong. Here's what we've come up with. Now, if I'm an idiot, which I very well could be, just tell me why. And they would not, and they don't do it. Anyway, we talked about market structure and why it's hard to find. 2017, I'm at a conference. I'm at a World Nuclear Association conference. I'm having dinner with some of the biggest fuel buyers. I don't want to say the name, but I was invited by a commercial officer at one of the big uranium producers to a dinner with some of the big fuel buyers. And we sat down. I said, hey, thanks for me. I'm just a useful dope here trying to figure it all out. I'm stumbling. But by that time, I had spent enough time doing supply-demand where something was really bothering me. I didn't have a vehicle to express the view, but had done enough supply-demand work where I was saying, wait a second. I'm looking back at models coming from the sell side that's three, four years old because nobody's around. Because uranium's down 90%. Nobody cares. The banks aren't paying attention. But when I lay out all the reactors in the world, and I did a little nuclear math, and believe me, I could do fourth-grade math, but not much beyond that. But once I educated myself as to how much uranium a reactor uses, and then started going out and laying that out and saying, oh, wow, okay, it's not a dying industry. Everything I read said it's dying, but it's actually growing a little bit. Now let me look at every mine in the world. And I look at every mine in the world, and I said, okay, well, that's interesting because there's nowhere near us. There's not much economic uranium. There's uranium that's being produced right now where when those higher-priced contracts roll off, they're going to shut those mines. They have to. Fast forward, 2017, it starts. I started thinking mines would have to be shut down. I started talking publicly about it. Over the next year, 18 months or so, well, 25% of world supply came offline. Why? Because it was uneconomical. In 2017, I'm sitting in a nuclear conference with some of the real big fuel buyers, and I just said, hey, guys, I'm just curious. I view on inventories, and they said, oh, well, you know, there's billions. There's a billion-plus pounds of inventory out there, and we use less than 200 pounds a year, and we only need a couple, but there's a billion-four. I said, oh, okay, a billion-four. I said, and I had just spent months going through all the inventory we could find. And what I concluded was of that billion-four, maybe 400 or 500 million was mobile, was going to enter the stream, but the rest was not going anywhere. You'd have to re-enrich it. Yeah. They were deleted tails. They were sequestered in sovereign funds. It was just, that wasn't hitting the market. And it struck me, one of the big forecasters, there's two forecasters in the industry, two price reporters and forecasters, they do the same thing. And they had talked about, they put out an inventory report, and it was a billion-four. And I realized, and sitting at this dinner, talking to this cohort, they were puffing their chest. They said, we're never buying uranium again. We're never going to have to buy it. It's a billion-four. I said, okay, well, you know, you realize that. Yeah. That's not all. You know, I didn't know the term mobile, but it was not all usable. And they said, what are you talking about? It's going to 15. It's going to 10. I said, oh, okay. I said, I'm just curious. Can I ask you guys how you're compensated? Are you guys paid to call bottoms? Because there's a lot of pushback at the table, and I'm just, I'm learning, but I've done enough supply-demand work to say that supply has to come offline. Yeah. That's going to lead to deficits, because this stuff is going to have to, some of this stuff is going to just go away, because they can't produce enough economical uranium. Again, I was laughed at at the dinner, and I said, can I just ask, are you compensated for calling bottoms? Well, you would have thought I asked them how much they have in their bank account. You know, they were offended that I would ask that question. I said, no, I'm not asking how much you make. Are you paid to call bottoms? Yeah. If you had an enterprising analyst, and you called the bottom, and uranium went double, triple. Do you get a piece of that? And they looked at me like I had three eyes, and said, no. I said, oh, okay. And so it was really there that I started to understand the market structure that I was dealing with, the power of incentives that I was dealing with. Most nuclear fuel buyers are nuclear engineers, right? Their IQ in their hand is bigger than my entire IQ. I mean, these are smart people, but they're not paid to be commercial. It's not like a gas trader or a coal. It's not like a gas trader or a oil trader that's working at these power plants. So you're dealing with all of these different things. So as we started going on, I went to the Nuclear Energy Institute in early 2018. I said, you don't know me from Adam. You guys represent the interests of all these nuclear power plants in Congress. Let me share with you why I think the math is wrong. Well, we did that. And I found a liaison there who would talk to me. And over time, he finally understood what I was saying. And he said, you know, we have a conference coming up in Boston. I see what you're saying. Can you come see me? I did that in 2018. And I got laughed out of the room. I got off the stage and a woman walked up to me and she said, how dare you come and talk to us? You're a Wall Street bad guy. Literally, you're a Wall Street bad guy trying to scare these good, hardworking people who buy fuel for a living and do a great service for the country. And you're just some Wall Street charlatan. And I said, like, are you out here? Like, who are you? Like, are you serious, lady? And I said, come with me. And we walked over to a little alcove in the conference area. And I opened up my laptop, which is a bazillion lines of supply demand work. And I don't even know how many, in fact, in 2018, how many tabs on a spreadsheet it was. And I just said, like, let me show you the work we've done. You know, maybe we're 20 minutes into it. And she said, you know what, I owe you an apology. And but what I realized was like, wow, this closed loop, cloistered group of people. I'm in the bar then sitting there. No one comes up and asks. 2019, the NEI asked me to come back and do the same thing. Why? Because I talk to them regularly. I show them my math and they get it. And they said, come back. We owe it to them to speak to them. I was in Nashville, Tennessee, and I spoke to them. And I got the same reaction. I was told I have no idea. I shouldn't belong there. That's when I knew something was broken in this industry. Something was wrong. Not that. But and where it goes back to, Eric, is the cost of uranium, the cost of the nuclear fuel cycle, the front end, from upstream to downstream to getting it in a place, a couple of years worth of time, there's four different steps. That's 25% of the cost, roughly. Uranium could be mid single digits to low double digits, depending on pricing. But it's not 80 to 90% like coal and natural gas are. So these folks are not commercial creatures. They're not paid to be. They're not incentivized to be. So here we go. You fast forward all these years at these conferences. It's like pulling teeth to get them to meet with you. Maybe you grab them in a bar. You talk to them in the hallway. You get them in an elevator. But they show zero interest. Now, this is, and again, I was public at $17. We're well north of $100. I got something right. And there's no ego here. I got it right. I get plenty wrong all the time. But I got the direction right. And they're still there. There's still no curiosity. Now, the difference is when you go and start talking to people and say, hey, I'd love to talk to you. You want to talk to like, well, no, you know, we get it. That pricing's here. But just wait till next gen comes online in 2028, 29, 2030. Wait till Denison comes online. Then our problems are solved. And I'm like, well, that's really interesting. No, they're not. Let's talk about structural deficits. They don't want to hear it. But the point is trying to get someone to talk. A, the utilities, probably their structure wouldn't allow them to come on us like that. But you're not getting the disagreements. I'm not getting the pushback. I'm getting the, okay, so prices are here. Maybe they go down in the future. As soon as this new supply comes online, well, that's not solving your problem. So that was a really long-winded way of answering your question. But I thought it was important to give you some context as to why it's hard to find them.
Speaker 2Well, I see this as a really, really important, I'll call it a crossover of sentiment. And we all know sentiment is hugely important in investing. On one hand, we've got a sentiment signal from Wall Street, which is, okay, we're not going to think through this uranium thing. We basket it in with AI because to us, that's what it seems to make sense. And because of the AI, CapEx boom potentially being at risk of busting, the sentiment couldn't possibly be worse. Meanwhile, these guys that wouldn't contract, and for years now, they have not been contracting at replacement rates. So they're drawing down on their inventories and their past contracts in order to keep them going. They're not buying more. They've had an opposite reversal in sentiment. So you've got the people that are actually doing the buying and the spot price of uranium, as well as the term price of uranium, are going up as the fuel buyers sentiment has turned bullish. You can't find a bear in the room. And at the same time, everything is on fire sale because Wall Street is basketing uranium in with nuclear. I mean, it seems like a value play, you know, panacea.
Speaker 1Yes, sir. It's bananas. But think about what you just said. So you'll see in the deck, utilities are contracting a little over half of their needs.
Speaker 2Yep. That's slide 25 in the deck.
Speaker 1Yeah. So basically what that means is, you know, in a given year, you consume, pick a number. Once, you know, going back years, 160, 170, 200. Now, if you look at industry forecasters, they're typically very low versus where we've seen it come out. But basically they're contracting because the market is such that about 80 per 75, 80, 85 percent, depending on the year, in that number is bought under long term contracts. Why? Because there's no substitute. If you get it wrong and you don't have supply guarantee to come in, you got a problem because you can't coal to gas switch. Uranium is it. And so they need security of supply. They're not financially incentivized to get it right. And so the contract, the long term contracts kind of guide everything. And so what you will see when you look at the, I don't know if I, I don't think I have that slide in the deck, but they buy at peaks and they sell or don't contract when prices are low, typically. Why? Because it doesn't matter to them. They buy what they buy when they buy it to secure supply. year after, as you're going to put stuff into the fuel cycle, you're drawing down inventories. And so you're sucking down inventories that are out there, but you're not testing the economic viability of supply. So if you are the cohort of fuel buyers that are out there that are only buying half of what their needs are, yet the supply stack on paper is able to produce more than what that demand is. Commodities 101, supply demand 101. When there's less demand for something and more supply, prices go down. The long-term price of uranium, long-term price, has quadrupled. How is that possible when utilities are only pulling down half, are only contracting for half of what they need? Now, when you start to look at the math of how much supply is going to need to be contracted. You're looking at over a couple of billion pounds by 2040, and this is mining. So 2040 is not quite tomorrow, but it's two days from now. So when they start, those pounds, there's not enough economically viable pounds above ground right now to feed that beast. So when they start going into the market, it is going to be like putting a pig through a python. And you saw that last cycle because what you also have to do, they've destocked for 15 years. Anyone who understands the commodity market, and I'm sure everyone on this or most people on this call do because you have a sophisticated audience. When you destock, what do you need to do? You need to restock. So if you're looking at demands in the $200, $210, $220, $230, well, you're going to have to be buying at $250, $260, and $270 to fill your coffers back up. And so that supply does not exist right now. Higher prices will incentivize that supply. So let's get back to what we were talking about earlier about the costs. So if you just go to slide 26, you'll see, we say the cost curve needs a reset. And so you'll see in the deck, you can understand mining costs. And I'm sure your listeners understand there's cash costs and there's all in sustaining costs and there's all in costs. There are different cost levels, right? all these uranium companies, with the exception of a couple, that's all they do is mine uranium. They're pure plays. So you can't run a company if you can't make money. And so, I mean, you can't run a mine if you can't run a company. And so you need an all-in cost. And as you'll see, we explain how we arrive at that all-in cost. And my presentation in 2019 at the NEI talked all about how the costs are wrong. It was literally the costs are wrong. Basically, what I'm showing you in this slide is the operating cost curve that the industry forecasters put out. And what you will see is that cost curve that they put out going back to their 2019, they were showing the weighted average cost of production across the industry was $24 a pound. And then it was $27 in 2021. They put it out every two years. And then it was $30 in 2023. And then it was $38 in 2025. That's the weighted average cost for the entire cost curve. Kazatomprom, the world's biggest uranium miner and the lowest cost uranium miner, we put 40, it's $38.45. It's $38.45, not the 38 of the weighted average cost. And so the cost curve's broken. It needs to be entirely reset. And you saw, you mentioned Cameco, there were prices that were higher. Well, the whole curve's moving up and to the right. And so you're in a period now where fuel buyers have billions of pounds to contract to cover their needs out to 2040. And again, if it's not tomorrow, it's two days from now. That's mining years because the mines that can satisfy that don't exist. They're not in production. They're not in development. And you're looking at deficits in the structural deficits of hundreds of millions of pounds as we stand now. And again, it doesn't include AI. It doesn't include all that data center stuff. So at the end of the day, when contracting, like you see in these cycles, when it turns, when people get nervous. Now, prices have moved up 4x. Like I said, at these conferences, it's hard to find the bear from the other side. But they haven't panicked yet. When they start, and it will take one, Eric, and let me explain the dynamic of this market. When you're looking at your, you know, there's 60 nuclear power plants in the world. And, you know, when you're looking at the bigger entities, the ones with the, you know, several reactors, you know, they're sophisticated. They understand what's going on. Have they gotten a price call wrong? Yeah, a lot of them have. Have a few gotten it right? Yeah, a few have. But many have not, but they've gone along. They're not really that worried. But when you start to get down, and not to pick on any one particular one, but when you start to get down to the onesies and twosies, the folks that have one reactor or two reactor, when you speak to some of them, super smart people, really nice, but not connected to what's going on in the day-to-day, all it takes is one of them. And again, what I said earlier about the price reporting, the price reporting doesn't report where the price is struck. It reports where the lowest offer is on a deal. What I can see happening is some of these smaller operators that aren't in the market on a regular basis, they might need it every four, five, six, seven years, and they're not commercial. So right now, the market is telling us, and you don't have to believe me, the price of uranium in the contract market is up 4x when they've only been buying half of what they need. That to me says a lot. Now, if you take a utility that needs uranium and they haven't, that there's a shortage yet, and they go in, well, what I can tell you is when the utilities were putting out requests for proposals a few years ago, they might have been getting 7, 8, 10, 12 or more people coming back. back to them. When they put those out now, they're getting very few coming back to them. Why? Because it's turned. It's a seller's market. And the uranium miners don't want to sell their book at these prices. And so they step out, the big guys especially. They say, we're not interested. There were multiple offers when RFPs went out for conversion services. And that was like that for years. It sat at $4 per kilogram for so many years. And it was unprofitable. It was a dying part of the fuel cycle. Everyone took their eye off the ball. And one of the countries went out and put out for conversion services and nobody bid. Nobody came to the table. Conversions, it's over $60 right now. That set it off. And so remember, enrichment, uranium is the product. The services are enrichment, conversion, and fabrication. Those have had huge moves, $4 to $60, $30 to $200 plus. Fabrication's also up. Uranium is 4x, but very quietly. The difference is the product always catches, or the product will catch up to where the service move has been. And why? Because you can't, the services don't matter if you don't have enough products, so they've got to incent the price. And so that's kind of where you're at right now. A very, I would say, more aware buyer base still wrestling with the fact that prices have gone up So if you are the cohort of fuel buyers that are out there that are only buying half of what their needs are, yet the supply stack on paper. that, I'm not going to say, come to Jesus moment, right? Everything is pointing there. When it happens, you don't know. But, you know, you asked earlier, Cameco had a tough quarter, but people missed in the fact that Cameco told you they had triple digit pricing and that's not being price reported. They said that on the conference call. That's the takeaway from that call. All the other stuff is noise. You got to be on top of those things to be able to take advantage of them.
Speaker 2Your analysis has always been based on the existing reactor fleet. You take the conservative approach and you say, look, forget about all the AI and the data centers and all that. Just look at the reactors that are running. And I certainly respect that's the conservative way to approach this. But hang on a second. What if AI and data centers really is a thing? Yeah, it's a great question. And specifically, there's a phenomenon I've started calling the light water leapfrog, which is the same. Nuclear engineers who are stuck in not taking you seriously because you're not in their industry and you don't know anything. These same guys, they remind me of the IBM main framers in the 90s, the guys who were just convinced that the IBM mainframe was going to be the answer to computing forever. And of course, the smart people in the computer industry could see from the late 1970s that batch processing was not the way to build computer systems. But the main framers were just so stuck on that paradigm. Had to be the answer forever because that's what they knew and that's what they were used to. And I see this happening again, that generation four reactors, advanced reactors are being ignored. If it's not from Westinghouse, it's not taken seriously. Well, look, all of atomics is building a factory right now in Georgetown, Texas, where they're going to assembly line mass produce a hundred nuclear reactors a year. We only have 440 nuclear reactors in commercial operation, the whole planet. They're going to make another hundred per year. And of course, it's speculative. They haven't proven that yet. I get it. But what if that comes true? I mean, they've already taken their first reactor to criticality on the 4th of July, made news doing that. There's no reason not to think that these mass produced reactors, and it's not just Allo, it's Valor Atomics. There's several companies that are looking at it. And it's not just Allo, it's Valor Atomics. are looking at assembly line mass production of nuclear reactors. A lot of them are micro reactors. Allo's the only one that's actually looking at something at a larger scale than that. But the thing is, they're talking, they're promising their customers that they're going to be delivering these factory mass produced reactors in 2029. Okay, so let's assume that's marketing and it's really going to be 2030 or 2031. Okay, that's half way or less than halfway from how long it's going to take before a new AP 1000 that gets green lit tomorrow. You know, it's going to be half built by that. What if this light water leapfrog, I'm calling it meaning that the generation four technology actually hits the scene and it won't hit the grid because the cost of it initially will be too high. But what if the data centers and all the other users of behind the meter power, suddenly start needing to buy uranium, not in the 2040s, because everybody thinks that generation four comes after generation three plus, but what if manufacturing actually gets it to market sooner than the next AP 1000 that gets built? What happens then?
Speaker 1It was the old Cold War joke, the duck and cupboard drills, bend over and kiss your ass goodbye. You know, you won't get there because price can be an elixir, right? So are, as I mentioned earlier, there are depleted tails. Are there stockpiles? Are there very uneconomic projects that have been shuttered that require significantly higher price uranium that might be shallower, might be able to get access to their past producing mines that are not economically viable in any scenario that you really think about reasonable right now. But should what you're saying come to fruition, you can get there. The resources are, you know, the resources there, it's just not economical now. And for it to become economical, prices would have to move up way beyond what we're thinking about right now. And so, you know, I'll, the way, and the way I think about pricing is, you know, the long-term contract price at 99, ceilings right now are 150, 160 with floors of 70, 75 in that ballpark with a spot price of, you know, 91, $92. You know, so you, you start to think about, well, what's our, what are some corollaries? Well, in the last cycle, if you go back and look, pricing went from $7 a pound in 2000 up to 137 in the spot market, very briefly in 07, the contract high was about $95. But people look at spot because it's, it's recorded every day, unlike contracts, which is once a month, but you look and say, okay, well, 137 in today's dollars, you're looking around 200 bucks. A pound. And if you did the, the fundamental exercise of looking at what the supply demand was at the time where contracts were, where, where contract pricing was, was hitting all-time highs back then for that period and turn and spot was going up, there actually was a surplus of uranium in the market over the next five years. So if you sat down and said, okay, well, what is these guys buying three, four, five, six, seven-year contracts? What are the next five years look like? There was a surplus and pricing got to around 200 bucks in today's dollars. Fast forward to today, if we do that same exercise, which we have, there are massive deficits. And so when you start getting to contracting replacement rate levels, that's when price is going to have to readjust. Does it, you know, we don't, I'm not publicly forecasting that, you know, that's for us to know, but if it got to, if it got to in 200 in today's dollars, uh, when there was a surplus in the market, where's it going today? Now, should your belief come to fruition? They're going to have to tap resources. They're going to have to tap stockpiles. They're going to have to attack really uneconomic mines and they'll have to become, there's still an economic, but they're going to have to pay up for them, you know, where pricing goes, who knows? Um, so yeah, they'll have to jumpstart real shallow, low grade mines, right? There's plenty on the, there's some on the African continent that are really uneconomical, but they'll be able to do it because it's low grade mining subscale. One of the things you're seeing right now is scale is everything. And, you know, these, these smaller projects are really hard. 500,000, a million, a million, five, 2 million pounds are getting freaking hammered on costs. Mike, you said
Speaker 2earlier that the fuel buyers do not get compensated for timing the market and, you know, essentially being smart traders. I'm pretty sure they do have career risk if they let the plant run out of uranium. So it seems to me that if you do see something, and one of the things I've predicted and it's, it's an outlier, but I think it's possible is at one point, the same hyperscalers that are investing in these advanced reactor companies are going to figure out, wait a minute, it's not the reactor, it's the fuel station that we need to invest in. If a hyperscaler comes and says, oh, so next gen has a big mine, we'll buy next gen, we'll acquire it. Now you can't do that in Canada for legal reasons, but contractually, you could just say, we want to take off agreement, Lee, we'll take the whole thing. If there's a panic where all of a sudden the fuel buyers say, oh shit, that crazy nutcase Mike Elkin guy was actually right. I don't want to lose my job. I'm just going to contract for all of the supply that I might need. I'll go ahead and sign the contracts. Now, Grant Isaac taking that call is not going to say, oh, well, since we've been good friends for a long time, I'll honor last year's prices. That's not happening. So what happens at that point, if we get to the moment where we're of, oh shit, where the people who were never incentivized financially to time the market realize they are incentivized financially to not lose their job if they got into a can't cover the need situation? Yeah.
Speaker 1I mean, my guess would be they'll be late to recognize it because they've not been early to recognize it. And that's where I get, I use that analogy, putting a pig through a Python. You saw it in, in, in conversion services, pricing went up 15 times, even the little bit more and, and, uh, seven times or so in enrichment. And you've had four X, five X, depending on spot or term pricing move over the last seven, eight years. But it's, that's been more gradual. Hey, you haven't even tested the capacity, right? So would I be surprised to see a, a spike in a panic? No, I would hope the hyperscalers, they, we haven't spoken to them. No one's reached out to us on it. I would hope that they're recognizing that you could go and sign the PPAs and do all the stuff you want, but you better go figure out how you're going to get all this stuff you're building and all this data center stuff. If it comes to fruition, you better figure out how you're going to get fuel for it, because I hope you're not just assuming that's that. Cause if that's the case, you're going to pay through the nose for it.
Speaker 2Mike last question is probably the most important one. Look, you and I couldn't possibly be in stronger agreement that this is an incredible value opportunity. We're way oversold. I get it. But threatening or at least intimating that the Democrat platform, after there's tsunami could be to make AI and data centers public enemy number one. And whether we agree with it or like it or think it's rational, the reality is that nuclear stuff is basketed with AI. And if there's an AI capex bust, as much as we can agree it doesn't make any sense on a fundamental level, we're going to see a wipeout potentially. So it seems to me the big question for our sophisticated audience is how do you structure your trades to bring convexity into the equation so that you have, well, you either hedge it somehow or you bring convexity into your trading structure so that you can survive that potential big down before the big up.
Speaker 1Yeah. You know, I try and stay away from any type of insight or advice on that. I don't go near that. You know, I think what I would say though, Eric, is again, somebody's got to recognize that there is some tie into it. It's fundamentally, like we said, but markets can remain irrational. You know, one way to express the view that it doesn't get knocked around is physical uranium. You buy physical uranium, you don't, you know, it's not, they're not part of a basket. Now, some of the ETFs might be the physical vehicles, but if you actually own the physical uranium. But, you know, it is something that I think people have to be aware of. And, but where it gets trumped, no pun intended, not Donald Trump. But is, you know, there are big things circling out there, right? Should a, and again, it's not, not that it's going to change the supply demand that much. It can over time. And what you said, if you built a new reactor tomorrow, it's going to be years before it comes online. But there are big programs out there that are really part of executive orders. There's a lot swirling around where you could wake up one day to a, a utility signing on to build a brand new reactor. And that's what, that's what will scare the bears, be damned. And, and you'll see this. And, um, that's, if that happens, you probably see this thing go off to the races because it likely wouldn't just be one, it would be multiple. And there's talks of up to 10 to 20 reactors that want to be started by 2030. And, you know, when the AI sell-off has been occurring, nobody really cares. And they're kind of putting it on the wayside, but they're forgetting that that stuff is real. That stuff's out there. That stuff is potential. And again, you don't know if it's going to come to fruition, but there's a lot of smoke out there and where there's smoke, you know, that, that can offset it. You know, it's, uh, boy, you gotta have a strong stomach, uh, if you're investing in the sector. Uh, but, uh, the asymmetry is, is pretty remarkable.
Speaker 2Mike, I can't thank you enough for a terrific interview, but before I let you go for the accredited and institutional audience, what's the investor relations contact? How do they find out more about the fund that you manage?
Speaker 1Anyone can reach out to us.
Speaker 2It's iratsachemcove.com. And now it's time for our Macro Voices Market Desk segment with Patrick and Masil. But Patrick, before we get to where's the trade, last week, your free options masterclass took apart the Pelosi trades. What are you covering in this week's session?
Speaker 3So this week, we're going to be talking about the JP Morgan options will. Now, for those that don't know, it's a $20 billion fund that uses options to ensure downside risk. It's one of the biggest options trades on Wall Street. And I'm going to be deconstructing it and explaining exactly how it works. Live next Tuesday, November 17th at 4 p.m. Eastern time. Listeners can register free at bigpicturetrading.com. Okay, Patrick, where's the trade? Thanks, Eric. Mike's argument is that the uranium supply deficit exists independently of the AI investment cycle. Existing reactors need fuel. Utilities need to replenish inventories and new mines. So I'm going to be deconstructing it and explaining exactly how it works. Eastern time. The uranium supply continues to face rising costs and delays. Yet uranium investments are being sold alongside the broader AI trade, creating an opportunity to acquire physical exposure at a substantial discount to its underlying asset value. This week, I'm looking at the Sprott Physical Uranium Trust, which U.S. investors may know by its OTC symbol SRUUF. That quotation doesn't offer U.S. listed options, so this strategy requires access to the Canadian dollar listing U.UN with options trading on the Montreal Exchange. Using the $26.60 as a reference price, a return to full net asset value would imply a price around $31.50 based on our working estimate. But the trust frequently trades at a discount, so a full convergence is an ambitious assumption. The more practical question is whether today's deep discount could narrow to something closer to 5% to 10%. At an unchanged 31.5 net asset value, even a 10% discount would imply a unit price near $28.35. That gives us a recovery objective without requiring uranium itself to appreciate. To express that, I'm looking at the January 15, 2027 $25 by $28 bull call spread. Buying the $25 call around $2.50 and selling the $28 call at $0.90 produces a net debit of $1.60 per unit. All figures are in Canadian dollars. The long call contains $1.60 of intrinsic value and $0.90 of time value, so selling that upper strike offsets the time value entirely, leaving the expiration break even at $26.60, our reference price. So at $28 or higher at expiration, the spread produces a maximum profit of $1.40 per unit. We therefore need only a partial narrowing of the discount to reach the upper strike, assuming the underlying net asset value remains stable. Higher uranium prices could also support the unit price, giving us another route to the same outcome, or the two could simply be working together. Now the discount can persist or widen and falling uranium prices could reduce net asset value. But our maximum loss is the $1.60 premium paid with January defining the window for the thesis to develop. So we're committing limited capital with no net time premium at these reference prices for a modest normalization in valuation. We don't need uranium to surge or the discount to disappear. We just need enough of that valuation gap to close.
Speaker 4That's where's the trade. All right, Patrick, turning to equities here, stocks have recovered a lot of ground, but what would convince you that this correction we got over the last couple of months is now over?
Speaker 3That's a great question, Masil. So let's put this into context. Obviously, last Thursday, we had a very big washout in the markets that caused some very short-term oversold readings right across the board. And really, the story over the last week has been mean reversion. The S&P 500 now has rallied back towards 7,700, retesting the 50-day moving average and approaching a 61.8 retracement of its prior decline. And so as of this moment, this has just been a bounce in the markets. And at the same time, the NASDAQ has actually been incredibly weak. While the S&P has corrected around 7% from peak to trough, The Nasdaq dropped closer to 16% peak to trough. And what has to be identified here is that the Nasdaq bounce has actually been relatively weaker and in many ways hasn't even taken a stab toward that 50-day moving average. The market actually staying structurally in sell mode. And even though the rally felt very real over the last few days, there's no evidence that a new bull market has resumed. But what is the interesting part? well, first of all, the breadth of the market has been surprisingly strong. We remain around 71% of stocks above their 50-day moving averages. That's because this entire sell-off has been almost entirely centered around the AI story and semiconductors. For instance, the semiconductor ETF, the SMH, is down roughly 30% from peak to trough during this period. So the question now is, will the sector rotation that's been rotating money out of this AI story into many of these consumer staple? So moving forward, the real risk is, does the broader market start to participate in a bigger sell-off or does it stay resilient? What continues to be super interesting is that the Mag7s have been a mixed bag while certainly Google and NVIDIA have been substantial drags on the mag sevens apple continues to hold along 52 week highs will we continue to see a few of these mag sevens holding up or is there going to be a widening of the potential sell cycle That's going to really decide whether or not the bull can re-resume. weather, there's another
Speaker 4big round of selling as we move forward. All right, let's talk inflation because the latest October report has pushed yields and the dollar back higher again. Now, how does that change the picture going forward?
Speaker 3So inflation came in hotter than expected this week, 40 basis points on the CPI month over month and 30 basis points on core. So this is where the pressure on the whole market is going to likely come from. What we had was inflation came in hotter than expected, 40 basis points on CPI month over month, 30 basis points on core. And Waller came in with a message saying that a December tightening may have warrant even 50 basis point hike if these inflation numbers came in hot. And so now the rates markets is starting to price in the potential that there's going to be even a 50 basis point move here. The interesting part about this is that it created substantial moves in the market. The bonds and dollar. What we saw was bonds materially break down and rates rocket higher on this expectation. At the same time, a decisive breakout in the U.S. dollar to the upside. And what's notable is that it was against almost every cross currency, the euro, the pound, the Aussie, the Canadian dollar, and even the yen broke a one month trade range with a dollar breakout. And so what we're seeing here is that from an intermarket perspective, there was a very clear response. And now the question is, is a hawkish and tight fed and a rates market that is once again tightening conditions and a dollar that continues to strengthen going to behave as a disruptor to risk assets. This is certainly a headwind setting up for the markets here, Mass.
Speaker 4Now looking at crude oil, the asset has had one big rollercoaster as the WTI gave back roughly $20 in a matter of a week. How are you weighing the next move from here? Well, definitely in this
Speaker 3post-election period, oil went from $105 down to the mid 80s, wiping out close to $20 of risk premium. The central question is, is the peace optimism warranted to pull out $20 of risk premium? Now, we're still in a backdrop of very depleted global inventories. There's very little buffer left in there. And will there be a genuine deescalation in the Middle East? Or is there a risk that the situation will once again deteriorate and the oil will resume back to the upside? It's a big factor because it's going to decide the path of inflation and certainly how hawkish the Fed is going to be. So this is going to be still in the driver's seat. And whether or not there's a re-escalation, there's a re-escalation. And I think that's going to be a big factor. And I think that's going to may very well act as a disruptor potentially to risk assets
Speaker 4as we move forward. All right, let's turn to gold because we saw a strong rebound in the asset as yields retreated, but now that's completely been reversed. What does that tell you about the underlying trend in precious metals?
Speaker 3Certainly a lot of gold investors got excited about the turn up in gold over the last week. But when the inflation numbers came in hot and that US dollar broke out, rates started to come up, suddenly gold is already fading off of a test of its 50-day moving average. Look, the primary trend is still down. Lower highs, lower lows, almost all rallies are met with selling. At some point, gold will be cheap and will set up for a major buying opportunity and reversal of trend. But as of this moment, when you really look at the way the price action is behaving, you have to respect that the prevailing downtrend that's been in place for all of us, almost a year now, is still very much there. And so at this moment, respect the prevailing downtrend. The vulnerability is that a breakdown here could send us down towards $3,600 on the downside. We'll be watching for where that inflection point is for the potential next big buying opportunity.
Speaker 4All right, listeners, and that does it for this week's Trading Desk. I'm Asil Bagnan. And I'm Patrick Ceres. Have a great trading day, everyone.
Speaker 5The information presented on Macro Voices should not be construed as investment advice. Always consult a licensed investment professional before making investment decisions. The views and opinions expressed on Macro Voices are those of the participants and do not necessarily reflect those of the show's hosts or sponsors. Macro Voices, its producers, sponsors, and hosts shall not be liable for losses resulting from investment decisions based on information or viewpoints presented on the show. Macro Voices.
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