Smart Money Moves on Physical Uranium

By Resource Stock Digest Research
 
 
The smart money is buying uranium.

And in this case we’re not talking about uranium stocks, but actual uranium.

Yellow Cake, listed in London, announced this week it is raising US$110 million to fund the purchase of at least 3.5 million pounds of physical uranium (U3O8) from Kazatomprom at a price of US$28.95 per pound.

According to the company, uranium below $30 per pound is a compelling buying opportunity because:
 
“...supply curtailments, particularly Cameco suspending operations in 2020 and subsequently producing only 5 mmlb of uranium during the year and Kazatomprom continuing to 'flex down' production by 20% through 2022 have created an increasingly tightened and imbalanced market, which is beginning to translate into strong support for uranium equities and significantly expanded interest in uranium as an asset class...”


Yellow Cake CEO Andre Liebenberg said the company believes uranium is “structurally mispriced, driven by a looming supply gap.”

Indeed, with uranium gaining favor as a green source of baseload electricity — Bill Gates was touting nuclear energy again this week — demand is outpacing mine production that has slowed because of subdued prices and COVID infections.

Under its contract with Kazatomprom — which is the world’s largest uranium producer — Yellow Cake can purchase up to US$100 million of uranium per year. After this current transaction, it will have 12.8 million pounds of uranium.

And while individual investors can’t buy physical uranium to get access to this pricing mismatch... and shares of Yellow Cake trade in London, making them difficult to access from American brokerages...

One way to get investment exposure to physical uranium in general, and this deal in particular, is by owning shares in Uranium Royalty Corp. (TSX-V: URC)(OTC: URCCF).

Uranium Royalty was a founding shareholder in and still owns 9.6% of Yellow Cake.

Uranium Royalty also has the option to buy US$2.5M–$10M of the uranium Yellow Cake buys every year from 2019 to 2028.

This alone is enough to start making Uranium Royalty a go-to name in the uranium sector. But it also just acquired royalties on the two largest high-grade uranium mines in the world, on top of a suite of royalties on quality projects it already owns.

All this, and Uranium Royalty still isn’t included in the major Global X Uranium ETF (NYSE: URA), which is something we think will change...

And it’s something that would drive buying in Uranium Royalty Corp.(TSX-V: URC)(OTC: URCCF) if it does.

Take some time to get acquainted with the company with our report here before that happens.

— Resource Stock Digest Research