Uranium’s Supply Crunch Is Getting Worse — And Prices Could Go Much Higher

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This is a job for Indeed Sponsored Jobs. (upbeat music) - When you've got a job to do, Lowes knows how to help you keep it moving. My Lowes Pro Rewards members save more with member volume discounts on eligible orders to a quote of $2,000 or more. Plus, save time with job site delivery and select purchases. Not a member? Join for free today. Exclusions, more terms and restrictions apply. Can't be combined with any other discount, including but not limited to contract and/or special price and loyalty programs subject to terms and conditions. Details at Lowes.com/teriors subject to change. - The biggest bottleneck that we see in the coming years is Uranium. We believe it's going to go minimally to $150 to $200 pounds during the cycle and probably higher. We think this is going to be a very, very long term secular bull market. (upbeat music) - Joining us today, Justin Hune, founder and publisher of Uranium Insider. Hey, Justin, great to have you with us. - It's a pleasure to be back and very nice to see you today. - I wanted to get your take on a development in the nuclear space, which on the surface looks super bullish. We love when we see headlines like this because we know our audience reacts to them. Google and consolation agree to bring 890 megawatts of new nuclear power capacity to PGM grid. Consolation stock jumped initially on the news about 12% or so. But does this kind of news move the needle? What should investors be focusing on when they see this kind of story? What are you looking at? - Sure, so I would argue that the nitty gritty details of this particular announcement are less bullish than the market is reacting. But of course we're coming off of extremely oversold conditions and really, really terrible sentiment across the Uranium and nuclear spaces leading into this headline. But on its face, it reads as hyperscalers want more nuclear. And that's kind of what the sector is reacting to here. So to have the biggest nuclear operator in the United States, make a deal with one of the biggest companies in the world for adding capacity, this additional capacity is 100% via upgrades. So these are existing operating nuclear power plants and that 800 and something megawatts is across 11 reactors. So what they're doing essentially is investing over $4 billion in these upgrades. So these are significant improvements to these plants. This is primarily in upgrading the steam generators and the turbines and other operational elements infrastructure at these plants. So generally speaking, these upgrades don't actually equal significantly more Uranium demand. So on the Uranium side of things, directly, this doesn't really change much, but narrative-wise, it's a very, very bullish headline and it does just increase the amount of, well, the de-risking of all of these plants, the significantly increased likelihood that a company like Constellation when it comes time will be paying up for their fuel because they're operating into a dream environment as far as selling electricity and having the wealthiest companies on the planet be buying it from them. So it's bullish for the space. I'm not complaining whatsoever. But of course, I think the size of the moves that we're seeing today are on the heels of really poor sentiment across the space. So that usually shorts covering and terrible sentiment and all the weekends getting washed out over the last couple of months, that usually is fuel for a day like this and hopefully some follow-through as well. - Yeah, listen, I think that's such an important distinction and that's exactly what we want to do is get underneath and sort of help everyone be smart about what's the reality versus what's kind of the knee-jerk reaction in the headline. I think it's safe to say. So do you think that when you see something like this kind of announcement from Google and presumably there will be others, right? This is just, I think we're gonna get used to this kind of thing because we know there's energy and we'll talk more about that. But is this the logical progression as everyone tries to square that sort of energy supply equation or is this a sign that building new reactors is just still too hard? - I wouldn't say that it's a sign of building new reactors too hard. What it is is the hyperscaler companies are essentially trying to secure as much firm, clean powers they possibly can and signing power purchase agreements and power off takes for the next five, 10, 15, 20 years from the actual incumbent producers that have operating fleets that can be life extended and are being life extended for that period of time. That's really the low hanging fruit. It's kind of the absolute best case scenarios. This reactor is already built. Well, let's buy power from it for the next 20 years and maybe we'll put some money up front that will help them either go through the licensing process to extend the life, the operating license of these reactors which in the United States every single reactor is going to go to 60 years. Probably 25, 30% of the fleet has already applied for 80 year life extensions and if you ask the operators in the United States though I'll tell you that they plan to take their fleets to 80 years and some will possibly even see 100 years in the average age of the reactors in the US is about 46 years. So it's a huge, huge de-risking event and tailwind for the US operating fleet. Just simply the growth of data centers and the US is building what, like, four or five times more data center capacity than the next largest data center builder. So it's incredibly de-risking for still the world's largest nuclear fleet. As far as new nuclear goes, there definitely are some investments and engagements that we've seen on behalf of the hyperscale is with new nuclear, so Amazon is heavily invested in X-energy. Meta is partially funding two terapower nature and reactors. These are both advanced, small modular reactors. Google has a deal with Cairo. It's not as binding as the other two, but there is interest there. But likelihood that we will see a new capacity built as far as new nuclear not just operates in the US, I think is very high still. But what we're seeing right now is a securing of the low-hanging fruit. That's what it looks like to us. I don't know if this is a, if this question makes sense. And we'll get, again, we'll dive a little bit deeper into what this means from an investment point of view. But do you think of the sort of risk profile around those two avenues as very different? If you're talking about de-risking existing as opposed to building new? In the United States. For investment, from an investment point of view. From an investment point of view, well, I mean, an established company like Consolation that's the largest nuclear operator in the States, looking at these kind of deals like the headlines today. It's obviously a very bullish picture and an easy investment to make into that existing company. Versus, let's say, investing in some of these advanced reactors, small modular reactor companies that are still in their infancy. Some of them haven't even been public for a year. Maybe they've been working on designs for a decade plus. But still, most of these designs are going through the process of actually getting permits and having the design be licensed and approved by the Nuclear Regulatory Commission in the United States or the regulatory bodies in other countries. There's a lot of momentum there. But we're still seeing either pre-construction or the very first of a kind being in the early stages of construction for multiples of these. So you can certainly do plenty of work in the space and choose your horses, let's say, on which of these builders or 2B builders or designers will end up securing more of the market share that is interested in building these SMRs. But we're talking about 70, 80, 90 companies and pushing 150 different designs. So in our estimation, there's going to be a half dozen primary winners of those designs. And we think a few of those are starting to emerge. So you can certainly kind of plant your flag and maybe buy a small basket, diversified basket of these advanced nuclear companies. But as far as risk reward goes, buying a Vistra, buying a constellation, even like a Duke or Dominion for that matter, certainly, especially for institutional investors that need liquidity might be a better and easier choice. But we have seen when risk goes on in this sector, we can see some of those nuclear companies just really, really take off. And we saw that back late 24 or early 25 when we had extreme risk on conditions in the nuclear space and some of these SMR companies became kind of meme stocks, like quite literally meme stocks being pushed by Wall Street that's community of people. to 20 something million people on Reddit. So, and that's not an investment case, right? You don't wanna buy something, hoping that it'll become a meme. That's really not a responsible way to invest. But I think that these big companies that are operating a bunch of nuclear power plants, the futures look brighter than ever for these companies. - I love this conversation because as we were just discussing, you came to this space and all the work you do as a retail investor who was interested in this sector, but didn't know, you realized you didn't know enough. I think that's fascinating and very helpful for people who I think are now on that similar journey. Can you just tell us a little bit about that 'cause I think it's really instructive? - Sure, yeah. So I first heard about this, I guess thesis for being long uranium, long uranium miners. In December of 2016, listening to Frank Curzio's Wall Street, Wall Street unplugged podcasts where he interviewed Jordan Trimble from Sky Harbor Resources. And it actually was the month of the bottom print for spot uranium unbelievably. And I was like, oh, this is really interesting. And I had primarily been kind of a technical momentum investor prior to that, or trader even. So investing in something that is hated as a contrary and fundamental bet was something that I really hadn't done much of prior to that point. So it was a whole different idea, as far as the style of investing for one. And then secondly, as I started dig a little bit into this opportunity at the time, I realized just how little I knew about nuclear energy. I didn't realize how safe it was. And leading up to that point, and I remember when Fukushima happened, I was like, oh my God, there's 400 something more of these things on Earth right now. We're all screwed. Like that was kind of the feeling. And the thought that I had in Fukushima definitely was a mess, but the fact that there were zero fatalities from that accident, and in many cases, that was a full meltdown. So not something necessarily we celebrated, but what did happen following that accident was a shoring up of the entire global fleet, all of the safety protocols, and the backup systems, and the backups of the backups for the safety protocols. And so the industry got much, much safer following Fukushima. But even including Fukushima, it's the safest type of electrician generation that's ever been conceived. And that was not something that I had any clue about. So in the process of learning more and more about nuclear, I recognize, oh, this sector is actually growing. Oh, it's actually safe. Oh, the Japanese that suffered the most recent meltdown accident are turning pro-nuclear and are restarting reactors. And all of these elements just started to build, and build, and build. And so the opportunity that I saw back then was the sector going from hated and terrible to just bad. And that was the contrary in investment. And of course, over the past, especially the past few years, this has done an utter 180 where it's gone from 1% or 2% compound annual growth to now pushing 4%, maybe 5%, which is a huge growth rate for a sector like nuclear. And then, of course, to have electricity demand just go through the roof in places where it's been stagnant in the United States. There was basically no electricity demand growth for the last 20 years, open to the last three, four years. So it's an absolute sea change in terms of the drivers for electricity demand, which is hugely derisking. And then the growth rate, we've just seen there's almost 80 reactors under construction globally right now. It's the most reactors under construction simultaneously that we've seen in almost three decades. It's very-- again, I keep using this term, but the demand is extremely de-risk, and it's a unique commodity in the fact that you can model it out. It's a pretty exhaustive exercise, but you can do so. You can understand all the operating reactors. You can make educated guesses on how long they will be operating for. Will they be life extended or shut down? What's under construction? What's going to hit the grid? That could be known relatively easily. And then you have to look at a very small number of supply projects globally. And our model has, I think, 50 or 60 projects that are either producing could be developed or in early stages of development. All of that is to say the supply to manufacture, you can map out with a really high level of confidence for a five to seven-year period. So yeah, that's a long-winded answer to say the contrarian idea that was 2015, 16, 17, 18 has turned into a full-on, quote-unquote, nuclear renaissance. We think this is going to be a very, very long-term, secular bull market. And according to our models, we don't exactly-- we can't see what project will come online that will eventually balance the market and lead to a point where we have supply breaching demand, leveling off price and eventually being surprised with the price. We actually have no idea when or how that's going to come. Which is saying something. But I think that's so helpful. And I think it really kind of mirrors where a lot of our audiences, which is that they are looking to diversify. They are interested in the energy story. They may have treated commodities before maybe are tiptoeing into nuclear end or got stung by the meme crave. And so we're really trying to give them a better guidelines on how to think about the sector from an investment lens, what you need to be paying attention to, what you need to make sure that you understand. Because it is a little different from your sort of average commodity, I think. So let's dig into that a little bit. Why, given that really bullish statement that you just made, why has in sentiment and price action been so poor? That's a good question. So for better or for worse, the sector is extremely volatile. It always has been, it probably always will be. Part of the reason for that is the size. It's still relatively small. Just a general universe of investable securities in the nuclear and uranium space is relatively small. The market capitalizations of even the dominant companies in the space, into the biggest companies in the space. I guess Camico is almost more like a nuclear stock right now. But besides Camico, the other largest mid to large caps are 5, 6, 7, 8 billion. The relatively small companies, all things considered. I think really what happened this year is that we had two things kind of coalesced that led to multiple months of poor sentiment. One is that we had a absolute rip-roaring January, just right out of the gates. But the spot, physically-ream trust, raised over half a billion dollars. They bought 6 plus million pounds of uranium in less than two months. And the price shot from 80 bucks a pound to over $100 pound. And it just happened really, really fast. And the market got really backwardated. You had spot run well above the long-term contract price. And then it came right back down. So the fact that you had a super strong move right out of the gate, followed by a rug pull in February, then you had investors have been go, OK, again, we're getting the rug pulled out. This is still not that moment that we've all been waiting for, where the sector runs really, really hot for six or 12 months or two years straight. And that's kind of the thing that everybody's waiting for is just that consistent run looking back at '04 to '07, where you had in everything, as far as every commodities on most markets were just in a raging bull market. So zooming forward to today, you had the big move in January, the price peaked, came right back down. And then following that, you ended up with kind of the AI story softening. And this, again, the AI tailwind for the sector primarily is the de-risking of the existing fleet. That really is the biggest tailwind. And it's a huge, huge tailwind, because we're seeing life extensions all over the place. We're seeing Taiwan restart a reactor. We're likely to see Belgium restart a reactor. We're seeing France life extend almost its entire fleet. Give not a blanket approval, but a general approval for these two reactor designs that make up about 90% of their fleet that following individual, let's say, assessments, they can go out to 15, 60 years, which is a very, very big move for France. That's a huge fleet, the US, et cetera. And then China's building a ton of reactors. But the AI story definitely softened over the last few months. I mean, I'm sure that you've seen all of the headlines of especially the last six or eight weeks with the Anthropics CEO coming out saying, we need to put the handbrake on this sector. We need to reel this in. And then President Trump saying, yeah, we're not slowing down. We've got to beat China to artificial general intelligence, whatever that means. But we've seen, again, for better or for worse over the past two, two and a half, maybe three years that there's been a lot of these institutional sort of factor baskets where you have the obvious investments in the AI story, which are in video and the hyperscaler companies. And then you have kind of the picks and shovels in the adjacent place. And some of these SMR companies and the Uranium miners as well, sort of got lumped into that AI adjacent sector, let's say, or definition. And so these factor baskets that were that maybe had a mandate to have exposure to the picks and shovels of the AI story, Uranium got pulled into that. So when this softened and the price went up above 100 back down to 80 and then just started climbing slowly again, that pulled a decent amount of money out of the sector. sector. And so, I think that we've seen. And when the institutional factor passes, the sector is so small that if institutional money, you know, even reduces, you see a lot of retail just kind of throwing in the town and not just kind of gets worse. And then you have a typical seasonal bottom in August, which we did. The sector rallied 15, 20, 25% over the course of three or four weeks. And then again, it pulled back, which is also seasonally typical on average, but the pullback went a little bit deeper than people were expecting. And then you have all the public capitulation and everybody saying the sector is screwed. I'm never coming back. You know, all of that kind of expression is on Twitter, X. And we've seen this a dozen times since we've been following the sector. This is it's classic. And again, buying into terrible sentiment following, you know, even just a move like today is, it's been a reliable strategy for as long as I've been following this market. Everything we do on this channel has one goal to make you a sharper, better informed investor. Someone who understands the macro forces shaping your money before the mainstream catches on. But information is only half of it. The other half is acting on it. And that's what wealthy on membership is for. It's how you go from watching these conversations to putting them to work in your own portfolio. Membership opens three doors, access to advisors, helping build real assets into your portfolio and for accredited investors, access to specialized funds. To learn more, the link to become a member is in the description box below. Interesting. Do you think it's a mistake to bunch the or to categorize the nuclear trade as AI adjacent? It is part of the supply story that that sort of feeds the bullish narrative around that. But is it a mistake to think about that or is it reliant on the AI buildout? Oh, it's not reliant whatsoever. But it is correlated. And then sometimes the narratives and sentiment will move markets substantially more than the actual fundamental drivers of those two markets being connected. So, you know, as of now, like I said, the demand coming from the hyperscalers and the growth of AI and the growth of data center buildouts is hugely, hugely bullish for the existing fleet. As far as new capacity and increased demand for Uranium from actual new nuclear capacity, being built directly to supply electricity to data centers that hasn't happened yet. And whether or not that will happen remains to be seen. But the signs are there that it will. So there's multiple signs. Like I mentioned, the hyperscaler investments into some of these SMR companies. But at the same time, you've also had hyperscalers directly communicating with and looking into the fuel cycle. So we've heard from next-gen energy, for example, who are in the early stages of development of the largest Uranium mine built in a very, very long time, which is the Rook1 project in Saskatchewan, that they have stated that hyperscalers have been communicating with them interested in potential Uranium offtake in the future. And what that looks like to me is that there is intention for them to be involved in some capacity with new nuclear capacity. And that would be quite the headline. I do think that that headline is coming probably in the next 18 to 24 months. What exactly that looks like is anybody's guess, but it isn't needed. Like I said, we can model the existing fleet. How long that's going to operate for? When that's hitting the grid? How much Uranium all of that is going to consume over the timeline that we want to model? And compare that with the supply. And we already know that the inventories are, I mean, utility inventories are okay, but they kind of always are commercial inventories and above ground mobile inventory have shrunken by a dramatic amount since the 20 teens. And now this is why we've seen supply response 40 something percent since 2021. We've gone from 120 something million pounds of supply direct mine supply to over 170 million pounds in about five years. Decent supply response, almost all of that has been brownfield projects restarting. And what has happened to price with that significant supply response? Price is tripled. So we're not seeing an inventory plagued or a supply plagued sector that we did for a close to a decade following Fukushima with all that demand destruction. Now the industry is utterly reliant on pounds coming out of the ground because there isn't that secondary supply or inventory buffer like there used to be. So the fact that we've seen supply response in the way that it has and prices tripled I think is an extremely important signal. So that's kind of a long winded meandering answer. The AI, AI adjacent element of this is real. I do believe that there will be an increasing level of connection between those two worlds as the years go by. But as of right now, the main tailwind has to do with these reactors are just going to keep going and keep going and keep going and keep going. So if we go back five years and we were modeling in, you know, dozens and dozens and dozens of reactors to be closed, we've had to go back over that period of time and adjust those models to add 20 year extensions to almost everything that we were expecting to close between 2025 and 2035. I think that's a really important distinction. In that macro picture, because AI headlines and that story is so prevalent, what about the sort of ramping up nuclear as part of national security, energy security and energy reliance? We now see that energy supply chains and choke points are now very much a part of war. They're very much a part of the geopolitical conversation we're having. Is that energy reliance? Is that feel like that's real? What's the reality versus the optic around that political conversation? It's definitely real. And I think that what we've seen transpired this year in terms of the closure of the straight arm moves due to the war in Iran, that that has highlighted how important energy is for sovereign security. And so the countries with nuclear, like I said, they're de-risking those fleets. Their life extending the reactors. In some cases, we're seeing inventory building. It's especially the case in the east. And so between China, India and Russia, we're seeing a huge build out of nuclear. And China has 40 something reactors under construction right now. Almost half, roughly half of the reactors under construction globally are in China being built by the Chinese. Russia has a huge export book. So Russia has a lot of geopolitical influence in terms of actually building and operating nuclear power plants in other countries. I think that there's 23 roughly 23 reactors currently under construction by Russia in other countries. And Russia has to fuel these reactors that are export constructed as well. So they're the biggest player in enrichment globally, the second biggest in conversion, third largest uranium producer. And Russia is buying uranium. So despite being the biggest contributor in the fuel cycle, arguably globally, to speak generally, they are customers and are buying uranium from their JV partner, because Adam Prom in direct competition with nuclear utilities. So that's a huge development that was just announced back in August. Then you have India that's been, you know, they've got a fleet that's kind of split between native built heavy water reactors and Russian built VVER reactors. And Russia is building more reactors there. India is building more their native heavy water reactors. But their fleet has kind of been, you know, constructed decades ago and has sort of been in Stasis. And they've had very kind of bullish narratives around what they want to do with nuclear. But the industry, you know, up until I would argue this year has been sort of, well, yeah, we'll see if they actually get it done. We don't really believe, you know, the Indians are all talk and they don't ever get anything done. And then this year, we've seen the Indian national nuclear operator sign two huge contracts combined, pushing 50 million pounds between Kazat and Prom and Kamiko, between Q4 and Q1. So that's a huge, huge contract that to us looks like it's significantly greater volume than what will be necessary, necessary simply for their existing operating fleet. They've also changed some liability laws in the country so that it would make it much more attractive and easier for international companies to do business and actually participate in the build out of nuclear fleet there. So India is definitely building Russia is exporting in a major way and building a handful of native reactors. But China is the by far the country and not just with nuclear, but just in general is is making extremely aggressive moves in shoring up their own energy sovereignty. They're building a ton of solar, they're building a ton of coal power plants and they're building, you know, 30 something, almost 40 nuclear reactors currently. So they're going, you know, every single possible type of energy generation, they are just absolutely going all out compared to every other country. The US, because it's not, you know, a communist country with state owned operators and builders, we're dealing with a democratic country that we have public and private companies that are have to collaborate in a very complicated sector. So there's a lot more red tape, there's a lot more financial risk. So it's happening here, it's just very, very slow. There's a recent deal between the US and South Korea that looks good so far, significant investment by the South Koreans to actually aid in the construction of six Westinghouse, AP-1,000s and two Korean design AP-R 1400s. That is still not set in stone, but that was a headline that hit, I think a week and a half ago, moving in the right direction, still not quite there. - On the US front, is NIMBY a big issue for nuclear? We know it's really rearing its head with data centers. A lot of people aren't actually sure it's actually about the data center itself, it might just be kind of tech backlash, but nuclear was the original NIMBY, don't want it in my backyard based on what you said. That sort of reputation in the court of public opinion, is that an issue for the industry itself? Is it a knock on issue because of all of the attention around data centers? - I would argue it's not really an issue whatsoever in the United States right now. Amongst the challenges to build new nuclear in the US, that is, that's probably not even in the top 10. And the main reason is that there's already a few dozen locations that have existing power plants that are already permitted to have more capacity built at those sites, where existing power plants are, and where existing power plants exist are in the United States. These surrounding communities are almost universally in support of those plants. They provide great jobs, you know, even in California, the city that's around Diablo Canyon, which is San Luis Obispo, they love having this plant there. It's a huge provider of local jobs. The community around this plant, again, even in California, is in support of that plant continuing to operate because it is coming up against, and this is the one plant that has, it has NRC approval to 60 years. It even has the approval of the California Coastal Commission, which does nothing but throw sand at the gears of absolutely everything. And it's waiting still to be legislated and have whatever, whoever our new governor is gonna be, we'll know next month, I suppose, to sign on the deadline to extend it to 60 years. It's 10% of the grid in the state. They have to extend it, and I think they will. - Yeah, interesting, as you say, that even if it's even in California, I think that that is, you know, 'cause we know that usually that's a kind of lead horse on these type of things. So I think this brings up a really interesting conversation from an investment lens because that is, after all, why you got into this and went deep into this field. So when you talk about that sort of global demand, especially coming from places like China and India, who can kind of put the force of the federal government or central government behind this. And you mentioned Russia as well. Does that, from an investor, does that mean something relative to the price of uranium, the commodity versus the equities? How do you think about the investment choice? Because I think if you're looking at other commodities, you should think, wow, huge demand story, huge demand supply mismatch, I'm gonna, should I be in the commodity itself? And then talk about equities. How does that work or how are you thinking that through when it comes to nuclear? - So I would say, I mean, the core of the thesis is betting on uranium prices continuing to move higher, and they will. So from this standpoint right now, the investment in the physical commodity, in my opinion, is probably the best risk reward proposition. The least risk, the vehicles, the Sprot Physically Uranium Trust, and yellow cake PLC based in London. These, both of these vehicles give you exposure to the commodity, yellow cake has traditionally traded at a larger discount to its net asset value. The Sprot Trust is, I mean, after today is probably, you know, eight or nine percent discount to its net asset value. And that discount swings going from extremely oversold, risk off conditions where it's 15, 16 percent discount, and then it'll trade back up to Nav. When it trades above Nav, they issue units into the market and they buy uranium with that cash. That's kind of how, how Sput works, yellow cake has a deal that ends next year with Kazana Problem to buy $100 million with uranium annually. But of course, they raise money when they get close to Nav. So, looking at that discount to Nav, looking at what looks like a pretty firm floor in the Spot Price, borrowing something unforeseen like a nuclear accident or a complete meltdown in markets, we shouldn't see Spot move much lower from here, knock on wood. And the sector is pretty sold off. So, where is the price going to go? We believe it's gonna go minimally to $150 to $200 pounds during this cycle and probably higher because it's not gonna be based on incentive prices that ultimately will be based on the last marginal pound and what someone is willing to pay for it. That's the conditions that we are basically betting on for the next five to seven years in this market, which is the period of time we can confidently model. - Right, and are you, is it spot that we need to be focused on when we're looking for entry points? How does that differ how you think about it versus long-term contract prices because I believe they're different, right? - They are, yes, so the long-term contract price right here is $96.50 a pound and that's blended between UXC and Trade Tech, the two primary price reporters. That's a price that's updated only monthly and that represents the low offer of the previous 30 days for a base escalated or fixed price contract, which not a whole lot of those are getting done right now. Most of the contracts in the term market are referenced to the market at the time of delivery with $4 in the $70 to $80 range in ceilings at $150 a pound for delivery two, three, four, five, six years out. So it's a seller's market as far as those contract terms go. As far as the spot price goes, that's, I mean, the spot market is really kind of a surplus disposal market. It's where traders get some off-take from some production, they get monthly off-take. There's a few traders, for example, to get off-takes from Uzbekistan every month. Those pounds oftentimes get dumped into the market, into the spot market. You typically see four, five million pounds a month traded there. Last couple of months have been thinly traded. And interestingly, there's been more selling interest than buying interest in the spot market over the past couple of months, but the price hasn't moved down. And traders right now are positioned for the prices to move higher. And that's something that, you know, it's hard to get access to this kind of information, but that's something focusing on the physical market and the context that we have, give us that info, which aid in our conviction for buying into environments like we've seen over the last couple of months, which we have, but all that is to say, the spot market oftentimes is just noise, but it's not irrelevant. It is what investors have access to on a daily basis for free. So importantly, that's what the market can see clearly. And the spot market is linked to the term market. So if a utility comes into the term market and they're wanting to buy half a million pounds for delivery three to five years out, oftentimes that request will get filled by a trader. It's called a carry trade. And that trader will come into the spot market, buy in the spot market, hold those pounds on their books and deliver a few years out to a utility, and they'll add their cost of carry in their profit and all that. And so the carry trade connects the two markets. So you oftentimes don't see huge disconnects between the term price and the spot price. When that happens, I'll give you two examples. Last March, April, we saw a big disconnect at the downside. So we had the term market pretty flat around 80 bucks a pound, spot fell to like 64. When that happened, you had everybody in the market buying spot, you had utilities, you had producers, you had hedge funds. So when that was unnecessarily low, that was an opportunity for people to come in and shore up. And of course, that was a huge opportunity to buy the equities at that point as well. Because the market was a watching spot, term was flat and stable. So that disconnect was a big opportunity. If you look at the charts for last March and April, these things were on fire to end the year. They went up, you know, double and triple from those levels. Yeah. Another example of that is when it's extreme risk on, there's a lot of money coming into the sector, you have a backerated market with a front month settlement, spot market just goes nuts to the upside, the term prices flat. That's another signal that that probably is unsustainable, probably is not going to last. So when that spikes up, that's an opportunity to sell into that kind of euphoric move. But all of that is to say, much more volume is done in the term market. It's the market that investors really should be paying more attention to because it gives you much more of a signal of what is to come. And if you have confidence in what is to come in the mid long term, it can inform significantly better on what you might want to do in the near term based on equities and how they're trading. Super useful. When you look for the lead indicator, when it comes to those prices, I was at a conference talking to a mining executive in nuclear. And he made a comment that utilities don't buy yellow cake first. They buy it last. They buy enrichment first. So do you look at things like that? when you're trying to figure out what's the sort of lead indicator on your dashboard that gives you an idea about or helps you in making a forecast? For sure. That's a generally true statement. It's not a hard and fast rule. Fuel buyers for nuclear utilities will shore up inventories across the fuel cycle as is needed. And they usually have a decent amount of flexibility to take advantage of whatever opportunity might be there in the fuel cycle. If that said, generally speaking, they buy what they need to buy when they need to buy it. So there's not a lot of price arbitrage. And you saw that, you know, back in the 20 teens, you know, if you look in hindsight and say, why didn't every single nuclear utility just absolutely load up their coffers with cheap uranium? It was everywhere. It was cheaper than it had ever been on a relative basis. Why didn't they do that? Well, they didn't need to. They didn't need to hold a lot of inventories because it was so abundant because it was so cheap. And they all have, you know, budgeting oversight committees that will not necessarily allow them to make an educated bet on price. So if they see the price at 25 bucks a pound, you know, it's, it's their neck. If they make a case to their upper management that we believe the price is going higher, we should load up here, and then six months from that point, the price might be lower. It doesn't really look good and their job could be on the line that it isn't their job to time the market. It isn't their job to predict price. So utility fuel buyers do not act like investors. They're not contrarians. Most of them don't ever hedge in any shape or form. They buy what they need to buy when they need to buy it with all of that said because of the war in the new crane and over the since 2022, we've seen a lot of mostly Western utilities voluntarily avoid new business with Russia and shore up their enrichment needs elsewhere because they didn't know necessarily if they would even get their enrichment or their enriched uranium from Russia that they had signed contracts for in years past because of this disruption because of the war because of what could or couldn't have a geopolitically because of sanctions or tariffs, whatever it might be. It got really messy and so many different utilities bought extra enrichment, bought enrichment from the Western enrichors, and they focused on enrichment and conversion because Russia is such an important player in those two aspects. And what we saw was the price of conversion and the price of enrichment essentially triple over just a few short years. All-time high price is right now for both conversion and enrichment, it's a few dollars off for conversion, but you get the point. So the focus there definitely leads to a pull on uranium. So when you buy enrichment and when you buy a conversion, you have to then buy uranium to feed into those services. Uranium or U308 that is the mildly processed product that comes out of the ground, that gets shipped to a converter, converted to a gas, that gas is then enriched at an enrichor, then it's de-converted back to a solid and fabricated and a fuel that will process takes minimally 18 months and usually two to and a half years and sometimes longer, depending on the source of all of those elements of the fuel cycle. So this is all to say that yes, that statement is generally correct and the focus has been on enrichment conversion, you even have UXC which is the primary price reporter and nuclear fuel consultant coming out and saying the biggest bottleneck that we see in the coming years is uranium. It's had the least amount of focus in the last few years. We believe it's going to have the most, it's going to be the most price impacted for the next few years. The focus is going to be on uranium and their concern is looking at the demand and if you look at the demand right now, at the global capacity is roughly 400 gigawatts, that's going to be 500 gigawatts in about five years. It's an enormous amount of capacity hitting the grid in the next five years. And even UXCs, and they were pinned down in a conference, where is your focus in the fuel cycle right now? What is the biggest problem they said uranium? Uranium is the long lead item. It takes a very long time to build a uranium mine. So when we're looking at the equity space, you put the commodity itself, it sounds like, but when we're looking at the equity space, there's a lot of enthusiasm around SMRs. Again, this is sort of the headline and narrative that takes over dozens of companies trying to get a commercialized SMRs. Assumption that they will not all survive, how are you separating the winners from the losers? How do you see that space? In the actual nuclear companies, the small modular actors, designers, well, you have to look at what sort of deals they have in the pipeline. If you look at actually who the first customers are for these different designs and whether or not there are any projects that are either in the early stages of actually being built, how far along the process for approval from the regulatory committee. All of these elements are something that are really important to look at. In our estimation, there's a few that are going to be major winners. One big obvious one I think is GE of Renova with their BWRx 300 design. Already building the first one of those in Darlington, Ontario, in multiple deals, we believe they're going to build one at the Clean Triversite Tennessee for Tennessee Valley Authority. The early approvals were just released for that couple of weeks back from the NRC for early construction. That's a big one that's pretty obvious because they have so many deals in the pipeline. You have representatives from that company showing up to these conferences basically saying that the line is going to be around the block once we have our first of the kind built because they're having incoming calls and site visits to Darlington on a daily basis. It's also not a small peer play. It's a really well-established company. GE for Renova has a diversification of its portfolios, so you're not taking that slightly more frontier bet on a peer play with no capital in the need for venture, right? For sure. As far as peer play exposure to the SMR story, it's not the best option, but it is an established, highly successful company. That's the stock you just hold for decades and give to your grandkids kind of thing. On the other, there's two demonstration projects in the United States right now. It's Terra Powers Neatrium, early construction also in Wyoming already happening, and X Energy's XC100. They're the ones that have Amazon's somewhere in the ballpark of $507 million investment. I think it was their series C or Series B in general, which one? Either way, they are planning on building, is either a 10 or 12 reactor plant in the state of Washington for Amazon and X Energy. X Energy also has a deal with Dow Chemical in South Texas. That's the nearest to getting their early site construction permit, which we believe is going to happen in Q1 of next year. So those three are kind of the big ones in the U.S. as far as we can tell. Westinghouse has an SMR, BWXT has an SMR, Rolls Royce has one that's gaining some steam in the UK in particular. There's a handful of others. There's some interesting ones that are private and not publicly traded yet. It's a space that's going to continue to grow, but I would say over the next five years, I think that those half dozen winners are going to be very clear to the market. Yeah. Does it seem like a diversified portfolio is that that has an advantage in the equity space because there's been a divergence, too, right? Even when uranium prices seem like they do well, there seems like a divergence in a lag in the equity. I don't know if you see that, but if that is true, and does it seem like those that have a diversified portfolio or that have a footprint in nuclear but are not completely relying on it, do those seem like the strongest hands in the equity space? Yeah. I mean, I think the uranium stocks are still stocks, and I think that having general capital protection mechanisms in your portfolio are always advised, regardless of what you're investing in. So, having a basket of some of these things, because especially in the nuclear space, you don't exactly know what's going to win in terms of the actual nuclear designers and nuclear builders. There's other pictures and several companies in the nuclear space that have been left for dead that are extremely solid companies like the WXT, like Amentum, like the nuclear utility stocks that have sold off 20, 30% from their highs and some of them even more. So, and these larger cap established companies, some of them even pay dividends, you know, having a mixed basket of that is, is I think a no-brainer here. As far as the smaller companies, the SMR companies, some of these are very, very risky. I would not put all my eggs in any of these baskets, but having a diversified basket of these companies, I think, is also a decent strategy here, especially since the sector has been so wiped out this year so far, still, you know, one day, you're not late, and you're living in the space and some of these stocks are up five to ten percent, you know, they need to double and triple and quadruple to get it back to where they were even a year ago. Yeah, we always face that, right, and I did I miss it. That's the question we get asked all the time with all of this. We'll end with a literal real moon shot. I just saw a story tucked away someplace that there's talk about trying to put nuclear reactors on the moon, the U.S. once won there, 2030, Russia, China, some sort, it's Is that how does that sound outlandish? Do you think that's real? Are the sort of space investors and the nuclear investors getting together in some back room somewhere that we need to know about? - I don't know. I mean, I think the case for small nuclear reactors in space travel and eventually things like establishing electricity production on the moon at nuclear makes the most sense for sure. But I'm not holding my breath for any of these things. There's, the core thesis is just so basic and so simple and so easy to bet on in a confident manner that all of this other stuff is just, it's so much of what is just right tail. It doesn't have to pan out, but it is definitely a tailwind if it happens. So whether or not we see hundreds and hundreds of SMRs in the pipeline to be built following the first of a kind, second of a kind, that's not in our models, right? We have minimal SMR demand in our models. So it's all right tail if that's no balls. There's a lot of momentum around nuclear powered shipping across the, you know, in sea freight. You know, if that happens, I think that is, of course, as a no-brainer, we've had nuclear powered Navy vessels for, you know, 60 years. So this is something that, you know, we would love to see happen, but we don't model for any demand whatsoever from that. So all of these other things that nuclear has the potential to grow into the other sectors, if the elements of demand, they're fantastic if they happen, but they don't need to happen. So that's, that makes the investment much more comfortable, in my opinion, just all this other stuff. Great if it happens, if it doesn't, it's no short off my back. - Amazing, Justin, we are so happy you went down this rabbit hole a decade or so ago, and so grateful for you coming on today and sharing all of that intel with us. We appreciate it. - It's a pleasure, thanks for having me back. (upbeat music) - New and exclusive holiday decor just launched online at the Home Depot. Check out the viral Grand Duchess collection with smart holiday lights you can control from your phone. Easily customize the twinkle across trees, reefs, and garlands to match your holiday vibe. 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