Have confidence in the Uranium MIning Industry

I am not aloof nor am I hiding under a rock concerning the big sell off in uranium.
Before I even mentioned it to anyone I encountered this sell off twice before.

This time it is different in the sense that the news concerning the nuclear industry is great which is I why I kept recommending it. If you decide to stick with it, you will have what they call a trial by baptism. Here is a classic market set up (thinking 1998) where the most reliable investment – mortgages – turns out to be a sham and sells off. While the most spurned and speculative market – nuclear – turns out to have legs and sells off. Both market pundits say look at the cash! But if you look at TMA, it has a funding problem and they have no junk. While Mega, FRG, and Pinetree have over 100mln in the bank-cash!

If you look at the price action, the market is saying that deflation will occur and that the utility companies will have a hard time financing such speculative endeavours such as constructing new nuclear power plants saying “look at what happened in the 80s!” That was a time that utilities almost went broke building these monolithic nuclear power plants. But markets are never the same and things have improved in this industry. Natural Gas looks to explode higher. Oil’s prices will remain elevated. Coal is considered too pollutive and there will be harder time building them in this country. Yes everything I said in this paragraph only considers the US. The rest of the word is going ahead building these plants since they are state funded not privately; though the US promised subsidies this time around for US utilities. And as I mentioned in my blog, a recession or slower growth will probably expedite the nuclear industry!!!

Also, hedge funds bought the physical uranium. So they along with the government are probably going to liquidate positions in order to get cash. So it is a short term damper on prices. Which market makers are using to shake EVERYONE out of the uranium mining shares.

Additionally, even if they don’t build one more plant there is still a shortage. That is why spot prices have gone up 1000% And the current mines have serious issues producing more of it. One that is overlooked is BHP. If copper prices fall, their mine in Australia where they have invested 10-12bln dollars will be unprofitable. Mining and energy executives aren’t naïve. IN sell offs like we have they will buy and merge assets to gather resources in preparation for another bull market.

And did I fail to mention seasonality? The miners drill this time of year and announce their finds in late fall, winter. So until their spring/summer drilling results are out then there is no telling the price level people will place on these guys.

I hope this helps, but realize that now with this massive sell off the recovery will take awhile.