However, that Oliver Stone interview was awful. He rambles on, sometimes incoherently, often with erroneous facts. For example, the Fukushima disaster was primarily caused by a hydrogen issue, but it stemmed from a nuclear reactor problem. More particularly, the hydrogen explosions at the Fukushima Daiichi nuclear power plant did expose the environment to radiation and people did die from radiation exposure.
He speaks about putting nuclear waste in the ocean because, in his words, water demagnetizes it. What is he talking about?!?! This is about nuclear half-lives, not magnetic fields.
He also says that Marie Curie is the champion of nuclear power, which is arguably correct, but he neglects to say that she died early of radiation exposure.
The big issue in the US is that the oil and gas sector is powerful. It funds, and largely owns, the Republican party. It is not going to sit back and allow nuclear power to displace oil and gas. That's the elephant in the room.
However, nuclear will increase because it is the only viable solution to the climate change issue. And micro nuclear reactors are now available on site in industry which is a game changer. So Uranium demand will increase. But whether a US company is best placed to exploit that trend is questionable - especially with Trump coming to power for the next 5 years.
Yellow Cake may be a better option (link at the top of this comment).
I haven't spotted those erroneous aspects of the Oliver Stone documentary which speaks generally to the need for Uranium and is not related to UUUU.
Running your numbers today on $70 uranium and $1.258:£1 you get to £5.65 NAV per share for YCA vs £6.46 back in October. Over half your NAV discount has eroded in 2 months unfortunately.
Compared to UUUU whose strategy is producing mined uranium along with vanadium, rare earths and heavy mineral sands the idea of trading the Uranium spot price with zero by-products, along with a one-off 15%-30% discount to NAV doesn't feel terribly attractive, although I do agree with the sentiment of your article that the evidence is that demand is increasing and holding an appreciating asset can deliver gains.
Even at today's $70-$90 Lb prices mined uranium delivers a ~50% gross margin for UUUU and uranium extracted from monazite will be at a far higher gross margin (in fact with by-product credits it will potentially be a >100% margin). It's very unlikely YCA will achieve anything like those margins buying at spot in the hope of a future higher price.
Trump is very clear that he wants to encourage US energy production (what else does "Drill baby Drill" mean?) so I don't agree that either Trump or the Republicans shall be the elephants in the room nor that a US company will be impeded from delivering a strategic energy source where US Nuclear Power today sources 97% of its fuel from abroad! In fact it would not surprise me to see an offer direct US government support.
Yellow Cake is a Uranium pure play investment. The company is unlikely to increase its holdings, so it is a rare opportunity to gain exposure to this unusual commodity.
The price of Uranium is volatile, as with most commodities and is down from ~$81 in Feb 2024 to ~$63 in Nov 2024. As such, Yellow Cake, will also dip in value - the correlation is almost perfect.
Look at the chart of Uranium prices. As you have pointed out, the demand for Uranium is increasing and likely to increase further. I fully agree with that. The chart is showing higher highs and higher lows. So the recent drawdown is simply an oscillation during an upwards trend. To me, these dips are the time to buy into Uranium, whether directly or via a proxy like Yellow Cake.
The beauty with Yellow Cake is that it trades at a discount to NAV, which means that you are buying the Uranium at a discounted price. Your calculation above suggests a NAV of £5.65, yet you can buy the shares for £4.90.
Ultimately, Yellow Cake will either liquidate its holding of Uranium at market prices (so there's an arbitrage opportunity right there). Or else Yellow Cake will be acquired for its Uranium - perhaps by Microsoft for its Three Mile Island, or by someone else. It is very difficult to buy the kind of quantities of Uranium that Yellow Cake holds on the spot market without moving the price. So acquiring Yellow Cake is attractive and may command a small premium, thereby enhancing the arbitrage.
What we don't know is time scales. If this happens in the next 12 months, there is a big gain to be made. If realization takes 20 years to happen (exaggerating for effect), then the annual return on on investment will be diluted - although we have no idea where Uranium prices will be in the future, so the returns could still outperform the market,
The UUUU investment thesis is entirely different. It's an ongoing business with costs, risks and diversification in other areas (rare earth and heavy mineral sands). Over the long-term it may prove to be a better investment, but it also carries more risk (logistics, operational, political, etc.) Yellow Cake has none of these risks.
So the question is whether you are looking for exposure to the spot price of Uranium (a safer bet), or to a broader mining/extraction theme (more speculative). There is no right or wrong answer, its nice to have options.
Disclosure: I currently have no position in either Yellow Cake or UUUU, but having analyzed this market, I may take a position in the future.
How do you think YCA and UUUU compare to the tiny £68m mkt cap Geiger Counter (GCL)? Over 5 years GCL and UUUU are up 264% AND 292% respectively, YCA only 164%. YCA is less volatile than the other two.
YCA is a pure play on the commodity price. It has no operational risk and little in the way of operating expenses. But it also has no real capacity to grow. It holds a large amount of Uranium at an attractive valuation that should be worth far more in time. How much more? How much time? I can't answer either of those questions. But if you want exposure to uranium, it gives you that.
Yellow Cake is rather like Sprott Physical Uranium Trust ($SRUUF) except priced in GBP. Geiger Counter, on the other hand, holds a variety of uranium companies, 26% in Nexgen. It's 17% geared and trades at a 5% discount. They bought back a million of their own shares on Monday so they are trying to narrow that discount. They issue subscription shares yearly but this year's are priced at 74.58p with an exercise date of 30 April. Given the share price is 50.5p and hasn't been at 75p since 2011 they won't be worth taking up. They were last year though.
Hi Bloke, thanks very much for the write up! Could you elaborate or explain the Toliara calculation for the part where you say: "166% of their 2026 TARGETED Uranium production (of 6m Lbs)"
I've only seen the following guidance from the company: "Processing Monazite from Toliara will also add approximately 75,000 lbs of low-cost uranium production (at an incremental cost of approximately $8 per pound) per year at the Mill, totaling approximately 3 million pounds of recovered U3O8 over the life of the Project."
If you could give your take on this; are they just being very conservative in their guidance? My own calculation: 21,800 x 2000 = 43,600,000 lbs HMS (x) 90%= 39,240,00 Monozite (x) 0.32%=125,568 lbs Uranium per year.
Hi TJF, I arrived at 10m Lbs based on Toliara being 2.58bn tonnes of ore, containing 51.6Mt of Monazite, and 0.32% being Uranium meant there is 170 tonnes of Uranium. Converting that into Lbs (multiply by 2205) and divide by 35 years gets me to 10m/lbs per year. 10m lbs being 166% of 6m lbs.
Whether the recoverability is 100% is of course debateable. But even a 50% recovery factor would be incredible.
Remember Monazite is a nuisance for every HMS miner - not an asset. If they prove it at scale with Toliara, the 10m/lbs per year could be just the beginning!
Interesting write up, and I tend to agree with the sentiment. In fact, I wrote about a different way to play the Uranium market a few weeks ago: https://rockandturner.substack.com/p/good-time-for-a-slice-of-yellow-cake
However, that Oliver Stone interview was awful. He rambles on, sometimes incoherently, often with erroneous facts. For example, the Fukushima disaster was primarily caused by a hydrogen issue, but it stemmed from a nuclear reactor problem. More particularly, the hydrogen explosions at the Fukushima Daiichi nuclear power plant did expose the environment to radiation and people did die from radiation exposure.
He speaks about putting nuclear waste in the ocean because, in his words, water demagnetizes it. What is he talking about?!?! This is about nuclear half-lives, not magnetic fields.
He also says that Marie Curie is the champion of nuclear power, which is arguably correct, but he neglects to say that she died early of radiation exposure.
The big issue in the US is that the oil and gas sector is powerful. It funds, and largely owns, the Republican party. It is not going to sit back and allow nuclear power to displace oil and gas. That's the elephant in the room.
However, nuclear will increase because it is the only viable solution to the climate change issue. And micro nuclear reactors are now available on site in industry which is a game changer. So Uranium demand will increase. But whether a US company is best placed to exploit that trend is questionable - especially with Trump coming to power for the next 5 years.
Yellow Cake may be a better option (link at the top of this comment).
Hi James,
I haven't spotted those erroneous aspects of the Oliver Stone documentary which speaks generally to the need for Uranium and is not related to UUUU.
Running your numbers today on $70 uranium and $1.258:£1 you get to £5.65 NAV per share for YCA vs £6.46 back in October. Over half your NAV discount has eroded in 2 months unfortunately.
Compared to UUUU whose strategy is producing mined uranium along with vanadium, rare earths and heavy mineral sands the idea of trading the Uranium spot price with zero by-products, along with a one-off 15%-30% discount to NAV doesn't feel terribly attractive, although I do agree with the sentiment of your article that the evidence is that demand is increasing and holding an appreciating asset can deliver gains.
Even at today's $70-$90 Lb prices mined uranium delivers a ~50% gross margin for UUUU and uranium extracted from monazite will be at a far higher gross margin (in fact with by-product credits it will potentially be a >100% margin). It's very unlikely YCA will achieve anything like those margins buying at spot in the hope of a future higher price.
Trump is very clear that he wants to encourage US energy production (what else does "Drill baby Drill" mean?) so I don't agree that either Trump or the Republicans shall be the elephants in the room nor that a US company will be impeded from delivering a strategic energy source where US Nuclear Power today sources 97% of its fuel from abroad! In fact it would not surprise me to see an offer direct US government support.
Good luck with your strategy and idea.
OB
Yellow Cake is a Uranium pure play investment. The company is unlikely to increase its holdings, so it is a rare opportunity to gain exposure to this unusual commodity.
The price of Uranium is volatile, as with most commodities and is down from ~$81 in Feb 2024 to ~$63 in Nov 2024. As such, Yellow Cake, will also dip in value - the correlation is almost perfect.
Look at the chart of Uranium prices. As you have pointed out, the demand for Uranium is increasing and likely to increase further. I fully agree with that. The chart is showing higher highs and higher lows. So the recent drawdown is simply an oscillation during an upwards trend. To me, these dips are the time to buy into Uranium, whether directly or via a proxy like Yellow Cake.
The beauty with Yellow Cake is that it trades at a discount to NAV, which means that you are buying the Uranium at a discounted price. Your calculation above suggests a NAV of £5.65, yet you can buy the shares for £4.90.
Ultimately, Yellow Cake will either liquidate its holding of Uranium at market prices (so there's an arbitrage opportunity right there). Or else Yellow Cake will be acquired for its Uranium - perhaps by Microsoft for its Three Mile Island, or by someone else. It is very difficult to buy the kind of quantities of Uranium that Yellow Cake holds on the spot market without moving the price. So acquiring Yellow Cake is attractive and may command a small premium, thereby enhancing the arbitrage.
What we don't know is time scales. If this happens in the next 12 months, there is a big gain to be made. If realization takes 20 years to happen (exaggerating for effect), then the annual return on on investment will be diluted - although we have no idea where Uranium prices will be in the future, so the returns could still outperform the market,
The UUUU investment thesis is entirely different. It's an ongoing business with costs, risks and diversification in other areas (rare earth and heavy mineral sands). Over the long-term it may prove to be a better investment, but it also carries more risk (logistics, operational, political, etc.) Yellow Cake has none of these risks.
So the question is whether you are looking for exposure to the spot price of Uranium (a safer bet), or to a broader mining/extraction theme (more speculative). There is no right or wrong answer, its nice to have options.
Disclosure: I currently have no position in either Yellow Cake or UUUU, but having analyzed this market, I may take a position in the future.
How do you think YCA and UUUU compare to the tiny £68m mkt cap Geiger Counter (GCL)? Over 5 years GCL and UUUU are up 264% AND 292% respectively, YCA only 164%. YCA is less volatile than the other two.
YCA is a pure play on the commodity price. It has no operational risk and little in the way of operating expenses. But it also has no real capacity to grow. It holds a large amount of Uranium at an attractive valuation that should be worth far more in time. How much more? How much time? I can't answer either of those questions. But if you want exposure to uranium, it gives you that.
Yellow Cake is rather like Sprott Physical Uranium Trust ($SRUUF) except priced in GBP. Geiger Counter, on the other hand, holds a variety of uranium companies, 26% in Nexgen. It's 17% geared and trades at a 5% discount. They bought back a million of their own shares on Monday so they are trying to narrow that discount. They issue subscription shares yearly but this year's are priced at 74.58p with an exercise date of 30 April. Given the share price is 50.5p and hasn't been at 75p since 2011 they won't be worth taking up. They were last year though.
Have a listen to the Palisades Gold Radio Podcast interview with Christopher Grove from last week, talking about REEs (UUUU discussed).
Hi Bloke, thanks very much for the write up! Could you elaborate or explain the Toliara calculation for the part where you say: "166% of their 2026 TARGETED Uranium production (of 6m Lbs)"
I've only seen the following guidance from the company: "Processing Monazite from Toliara will also add approximately 75,000 lbs of low-cost uranium production (at an incremental cost of approximately $8 per pound) per year at the Mill, totaling approximately 3 million pounds of recovered U3O8 over the life of the Project."
If you could give your take on this; are they just being very conservative in their guidance? My own calculation: 21,800 x 2000 = 43,600,000 lbs HMS (x) 90%= 39,240,00 Monozite (x) 0.32%=125,568 lbs Uranium per year.
Hi TJF, I arrived at 10m Lbs based on Toliara being 2.58bn tonnes of ore, containing 51.6Mt of Monazite, and 0.32% being Uranium meant there is 170 tonnes of Uranium. Converting that into Lbs (multiply by 2205) and divide by 35 years gets me to 10m/lbs per year. 10m lbs being 166% of 6m lbs.
Whether the recoverability is 100% is of course debateable. But even a 50% recovery factor would be incredible.
Remember Monazite is a nuisance for every HMS miner - not an asset. If they prove it at scale with Toliara, the 10m/lbs per year could be just the beginning!
BMO warning of a uranium supply deficit...
https://acrobat.adobe.com/id/urn:aaid:sc:EU:42bb36de-896c-4599-8bdc-d981f92e48ad