At the end of 2013, I was very bullish on uranium, as I believed the end of the 20-year Russian Nuclear Agreement would spark a rally, as utilities would have to buy in the spot market. From December to March, many of the uranium miners, such as the uranium mining etf (URA), Cameco (CCJ) and Paladin were up significantly.
However, for the past two and a half months, the spot price has taken a nasty tumble. It may be similar to the recent shakeout in copper (JJC) below $3. The marginal players may be shaken out, but the long-term value investors may be continuing to accumulate uranium miners at decade-low uranium prices below $30.
Despite this shakeout, I am still bullish and looking at the high quality junior uranium miners to add to on this pullback.
The end of the 20-year Megatons to Megawatts Program will force the United States, which is the largest consumer of uranium in the world, to look to the domestic uranium producers such as Cameco (CCJ) and Uranerz (URZ).
Look for Japan to turn nuclear reactors back on this summer, as they can’t afford to import record amounts of liquefied natural gas. Remember, Asian nations pay 4 to 5 times higher for natural gas(NYMEX:NGN14). China is making a major IPO to raise money for expansion of nuclear power as well. Japan and China are confirming that nuclear will remain a key base-load power source.
However, the big news will come from Germany, which went away from nuclear after Fukushima and further relied on imported Russian natural gas through Ukraine. Electricity costs are skyrocketing in the EU. The tensions and sanctions on Russia have left western Europe in a vulnerable situation. The Germans may want to rethink nuclear, as did the Japanese, and come to the reality that it is either nuclear or be at the mercy of Putin.