Resource expert: Why uranium could be vulnerable to a correction
From Louis James, Editor, International Speculator:
People like predictions. They ask what my gold price projection for this year is.
But the truth is that all the math in the world won’t make such a price “projection” more than a guess.
I’d rather simply say I think gold and silver are going higher. I expect precious metals to have a better year than 2016. It could be a much better year.
There’s also the “other yellow metal” to consider. The price of uranium must and will at least double in the not too distant future. But I’m concerned that uranium’s great start this year may be premature.
Yes, Kazakhstan, the world’s largest uranium producer, has announced a cutback in production. It may even follow through. But that won’t make the current glut disappear in a day.
Remember, it’s supply and demand. We need to see demand eat up the glut before prices can be counted upon to rise and stay up.
With reactor restarts going slower than hoped for in Japan, and anti-nuclear sentiment there remaining very strong, there are still Japanese stockpiles coming on the market at prices roughly half the typical cost of production.
As long-term contracts that utilities had set at higher prices with miners expire, they can switch to buying cheap secondary supplies, like those from Japan.
Until this supply runs out, buyers won’t be forced to pay prices that make mining uranium profitable. With Kazakhstan’s help, that should come sooner. I hope to see it before the end of this year. Until then, however, uranium prices are vulnerable to correction.
The good news is that uranium needs to at least double for the average uranium mine to be worth operating. Once the glut is gone, miners will be able to demand – and get – new contracts at much higher prices.
It’s either that or the lights go out in large parts of the world.
That’s what makes dramatically higher uranium prices as close to a sure thing as exists in resource investing. Only the timing is in question. This makes me reluctant to recommend uranium stocks that have doubled recently, for now.
All the more so, given that even the best of the producers and projects don’t make much money at current prices. I’d love to see a near-term correction bring these stocks back in range, and if we get one, I’ll be an enthusiastic buyer.
Either way, I expect 2017 to be the year of the two yellow metals.
P.S. A gold mine I think is going to be the richest mine in the world is coming online in just a couple months. This could transform the tiny company building it into one of the biggest and most profitable mining companies ever. Best of all, it’s not too late to buy this stock before it skyrockets. Find the full details of my visit to the mine here.