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[Uranium] Portfolio Update: Well...We're Waiting!

Updated: Jul 12, 2023

My last uranium portfolio update was published on Aug 30th 2022. The months following that article have been quite boring and tested my patience. Being invested in uranium was as exciting as watching paint dry on a wall. As the equity markets might slowly recover from the 2022 rate hike saga, should the FED finally stop raising rates after the March FOMC meeting, it looks like 2023 will be a more exciting year for uranium equities. Fundamentals should matter again.


In this blog post I will share my current thoughts on the uranium thesis, share some information on medical isotopes and give an update on my uranium portfolio. My private uranium portfolio includes the following stocks:




Structure



Macro thoughts


One of the reasons I didn't share an update since August is the fact that while there are small news pieces about nuclear energy and uranium nearly ever day now, they rarely have any impact on the equity prices. You could go as far as say that the moves in NASDAQ index had more impact on uranium stocks price performance than any fundamental development in the industry.

Although uranium equities rose in H1 2022 due to geopolitical tensions and heightened awareness of the importance security of supply, in the second half of 2022/early 2023 no news irrespective of relevance seemed to matter. The only thing that mattered to equity prices were the FED, rate hikes, inflation, jobs report, SVB,...you name it.

There has not been much to say for me. I chose my companies and then the waiting game started.


A rare highlight was the Cameco (NYSE:CCJ) Q4 earnings call on Feb 9th 2023.

In 2022 CCJ added 80 million pounds to their contract book. The number for 2021 was 30 million. The opaque uranium market doesn't offer much information on long term contracting, but following the breadcrumbs laid in CCJ earnings call, tells us that the utilities are finally starting to buy uranium again!


CEO Tim Gitzel called 2022 a transformative year for the company and sees 2023 as the opportunity for further growth.

Source: Cameco Q4 earnings call


The bullish uranium market fundamentals Cameco experiences every day in their business dealings unfortunately weren't reflected by the uranium equity prices. Since early Feb 2023 equities experienced a major draw down again brought about by rising interest rates and overall market capitulation due to several bank failures (SVB, First Republic, Credit Suisse). Uranium twitter sentiment reached a multi year low of 0.15 last Friday based on data the Uranium sentiment bot collects.


"The value output in these tweets is the daily average compound polarity score of tweets containing #uranium from VADER. The compound polarity score is a measure of sentiment from -1 (extremely negative) to 1 (extremely positive)"



Many retail investors were also scared into capitulation by bearish sentiment voiced by a portfolio manager that, during recent weeks, was an interview guest on nearly every YouTube channel that covers resources investing. In those interviews he was talking about >1 bn uranium pounds ready to be sold into the spot market any minute now. "He heard that from a friend, that heard it from a friend" wink wink....

Contrast these statements, that obviously are voiced with a hidden agenda in mind, to statements made on Feb 24, 2023 by Mike Alkin (the originator of the uranium thesis) who has done 10,000s of hours of work to understand the uranium fuel cycle and actually speaks with the biggest producer in the world: Kazatomprom. Mike Alkin's thoughts can be found at the 3:36:56 mark. In my opinion, Mike's analysis makes a lot of sense and is based on data and not some anecdotal evidence.


Source: Bloor Street Capital YouTube


Medical Isotopes spotlight


Since I have been in the uranium trade, I also came across multiple adjacent topics that quite often are at major inflection points and their equities so far have performed better than classical uranium mining stocks. Silex is a great example of that. These type of companies are also not as cyclical as miners and can become great long term holds.


One of the topics I came across in recent months is nuclear medicine or medical isotopes. Every year, 48 million patients with cardiovascular disease or cancer worldwide use medicines made with medical isotopes. Medical isotopes form the basic ingredient of radiopharmaceutical products, which are used to detect (diagnose) or combat cardiovascular diseases and cancer cells (therapy). Currently the most relevant medical isotopes are:


  • Molybdenum-100: An emerging product used in healthcare as a replacement for Molybdenum99, the most used imaging radionuclide.

  • Zinc-68: An emerging isotope used in radio medicine to produce Copper 67, which is becoming a widely used oncology treatment, and Gallium 68, which is used as a radiopharma tracer during PET (positron emission tomography) scans.

  • Ytterbium 176: Yb-176 is emerging as a superior method of producing Lutetium-177, which is an eagerly-anticipated emerging therapeutic.

The thesis for medical isotopes has similarities with the uranium thesis in terms of the supply story and the concentration of supply coming from countries like Russia. Connections can also be drawn to heavy rare earths, which I have briefly covered in my article about Bannerman Energy.


Some of the companies I follow regarding this topic are listed below.


Silex Systems (ASX:SLX): Silex recently announced their Medical Isotope Separation Technology MIST project. The first focus of this project will be enriching Ytterbium to produce Lu-177. Other isotopes could follow later.




ASP Isotopes (NASDAQ:ASPI): ASPI is an advanced materials company dedicated to the development of technology and processes designed to produce isotopes used in multiple industries. They have an exclusive license to use proprietary technology, the Aerodynamic Separation Process, originally developed and licensed to them by Klydon Proprietary Ltd, for the production, distribution, marketing and sale of all isotopes. ASPI initial focus is on the production and commercialization of enriched of Molybdenum-100.


On march 13th ASPI updated their shareholders. The company's key goals for the remainder of 2023 include:

  • Completion of their second, larger isotope enrichment facility, which is capable of enriching kilogram quantities of various isotopes.

  • Entering into additional customer contracts for the remaining capacity of this second facility.

  • Starting commercial production and commercial supply of at least two isotopes

I briefly had a small watcher position of this stock. Current market conditions & the poor performance led me to sell my position. I have the stock on my watchlist and will buy back in, when the market is in a better place and the share price has stabilized.


Eckert Ziegler (FRA:EUZ): The Eckert & Ziegler Group is one of the world's largest providers of isotope technology for medical, scientific and industrial use. The company focuses on applications in cancer therapy, industrial radiometry and nuclear imaging. The operating business is divided into two segments: Medical and Isotope Products.


Atom mines: On Jan 10th, 2022 Eckert & Ziegler announced that they have signed a joint venture and exclusive long-term supply agreements for Ytterbium-176 with Atom Mines LLC, an innovative producer of enriched Ytterbium isotopes and a subsidiary of the non-profit Pointsman Foundation, both based in Austin, Texas. Atom Mines is not public yet and there is only very limited information I could find about them online. I reached out to the company and currently they are not seeking capital. However, they do plan to expand investment into multiple other isotope production lines in the coming years. I see a decent probability that they will come to the public markets in the coming years, when the isotope topic has become a hot topic among investors.


Isogen: Isogen (not public listed) is a joint venture between Framatome and Kinectrics, whose mission is to enable the use of CANDU reactors to produce the medical isotopes needed to treat and diagnose patients with serious diseases world-wide.


Telix Pharmaceuticals (ASX:TLX): Telix is a global, commercial-stage biopharmaceutical company focused on the development of diagnostic and therapeutic products using targeted radiation. Their first product is called Illuccix and is based on gallium-68. TLX is part of my wikifolio and I plan to add it to my private portfolio in the future (depending on my cash levels).


If you want me to dive deeper into this topic and write an article about it, please let me know.



Portfolio distribution



Dated 3/17/23 after US market close


Uranium equities currently account for 44% of my overall equity portfolio. It is important to understand that my overall equity portfolio reached a ~3 year low this week, bringing me back to summer 2020. Bear markets are tough, but during those times it is important to have more shares of the stocks I have the highest confidence in.


Centrus Energy was the first uranium stock (I don't hold that stock anymore) I bought in September 2020. The majority of my shares in other titles were bought throughout 2021/2022. The performance data thus is since inception and reflects averaging up and down into positions over time. As an example: In 2021/22/23 I averaged into my SLX position paying prices as low as A$1.17 and high as A$3.72.

The weighting towards uranium is quite heavy at the moment, as I took advantage of the low prices in 2022. It is my intention to sell down some of my holdings to bring the weighting more towards 20-25%. I am a uranium bull, but far from the crowd that sees sustainable prices above $200/lbs.


Looking at the table also proves a point I noticed for some months now. It shows that the companies that are not so often talked about on twitter/YouTube are the best performers. Yes some people (including me) talk about SLX, AEE & CGN quite often, but these are stocks the bigger accounts/channels hardly mention at all.


In these uranium portfolio updates I only talk about my private portfolio. I also manage a wikifolio called "Picks and shovels plays". In this wikifolio I Added Cameco during H2 2022. In Feb 2023 an opportunity opened to add Global Atomic to the wikifolio and so I sold CCJ to add GLO.


Trades


Please find below notes on what I sold since my last update.

  • Deep Yellow: In Nov 2022 I sold my DYL shares with a -2% loss and used the money for other stocks. Based on the news flow last winter I already sensed that the DFS would not be the slam dunk shareholders hoped for. I also took a deeper look at the Vimy acquisition again and have to say that I would've preferred DYL not to close this deal. As the projects are in totally different jurisdictions, it likely will not offer any synergistic effects. In addition, Mulga rock was postponed again last winter and likely will be a source of negative news flow going forward which leads to selling pressure. The Tumas DFS was released in Feb 2023 and my suspicion was confirmed. The NPV is relatively low and DYL shares sold off -35% since the DFS was released. This was not only because of the DFS of course and the DFS is only for the Tumas project. Still, considering that even after the sell off DYL has a market cap of A$415M it likely will not offer the leverage I am looking for. I am not saying that this project cannot be successful or that the share price will not increase. Looking at my portfolio though, I am more focused on holding a few concentrated positions that I am most confident in. I rather have more money in the stocks that I really believe in.

  • Aura Energy: I sold my AEE options (loyalty options I received for free as a AEE shareholder), but will keep the common shares for long term.

  • Myriad Uranium: I opened a starter position of CSNX:M in Sept 2022. In early March 2023 I sold my position with a +47% gain as I needed the money to buy other equities. Myriad is only starting drilling activities later in 2023 and will also raise money before that. I will have enough opportunities to enter again at a later point in time. I still like the company and think they will be successful long term. However, based on what I learnt with other exploration stocks, I know that exploration takes a long time and the stocks are highly volatile. In that sense I can make volatility my friend.


Please find below what I bought between September 2022 and Feb 2023.

  • Added to 92E & FIND in multiple tranches

  • Added to SLX in multiple tranches

  • Added to BMN



Discussion of companies


Aura Energy


Aura is developing the TIRIS uranium project in Mauritania. In addition, there are also vanadium resources at TIRIS, plus AEE also owns the 15.1 bn pounds HÄGGÅN vanadium project (including potash/SoP by product) in Sweden and a gold asset. The probability of Tiris going into production this cycle is very high and the spin out of the gold and vanadium assets offers additional value creation for shareholders.


There have been multiple significant developments since my last update and the Aura team is really driving forward the Tiris project at lightning speed. Three of the most relevant developments:


Bannerman Energy


BMN is one of my high conviction names and is developing the Etango Uranium Project in Namibia. It possesses a World class uranium mineral resource endowment of 207 Mlbs of contained U3O8. Recently I published an article about BMN, covering their Namibia critical minerals acquisition and why that could potentially lead to a bidding war for BMN.


In Dec 2022 BMN released the DFS for Etango-8. Please find the video below where CEO Brandon Munro presents the Etango-8 DFS presentation. Their intention is to make the final investment decision late 2023.


In Feb 2023 BMN announced hiring Gavin Chamberlain as COO. He holds very relevant experience in the minerals sector and was a key director involved in the development of the $2bn Husab mine in Namibia, which is one of the world's largest operating uranium mines.


Brandon keeps up the impression that BMN is not looking to get acquired but want to build the mine. This is a strategy that Rick Rule described in one interview as very effective should in fact M&A talks start at a later point in time. It ensures Brandon has all the bargaining power and can negotiate the highest price possible for shareholders.


Silex Systems


Silex Systems is operating a JV with Cameco called "Global laser Enrichment" (GLE). Part of my thesis for Silex is their new process for uranium enrichment (separating the isotopes with lasers) and the other part of their business which is a picks and shovels play on quantum computing. My investment thesis for Silex can be found here.


Silex usually doesn't do much promotion. Recently their CEO Michael gave the first investor interview since 11 years.


Shortly thereafter the company announced an offering raising A$120M capital. The reason for this capital raise is very positive.

First, the final decision has now been made to accelerate the uranium laser enrichment project timeline. Commercial production is planned to start in 2027 (which is tomorrow in nuclear industry terms) and the demo plant is planned to be in operation already by mid 2024!


Second, GLE/SLX voiced its intention to apply for the support offered via the US Inflation Reduction Act.


Third, the initial commercial production of ZS-SI should also start this year. We could get a news release about this topic any day now (most likely after the equity raise incl SPP is closed).


Fourth, the MIST project was announced.


CGN Mining


In my article about CGN mining from May 2021 I deep dive into the company and also explain my point of view on the uranium investments thesis at the beginning of the article.

CGN Mining is the only listed pure uranium company globally which is backed by a nuclear power group. They have their own trading house and are the sole listed pure uranium company in East Asia. It is great to see the thesis I laid out in May 2021 to slowly come to fruition.


In today's article I want to again highlight the new pricing CGN announced last year, as it gets lost in the discussion often. On June 16th 2022 CGN Mining announced new delivery pricing with CGN Group.

Source: CGN Mining June newsletter


2022 uranium delivery price with CGN Group: Arithmetic average of LP published by Tradetech & UxC in 2nd month prior to delivery month.


The new delivery price effective now points to them agreeing that the long term price will be much higher than the prices we saw until the end of 2022.


On Jan 18th, 2023 Morgan Stanley issued a research report covering CGN Mining. They issued an overweight rating and a price target of HK$1.22.


Baselode Energy


FIND will put the drills to the ground again this year at ACKIO. James Sykes wanted to wait until the financial markets are in better condition so that potential drill results will get the deserved share price appreciation response. The drill program is planned to start around May. In the meantime the below video gives a great overview on the first drill results from the Catharsis project and how to interpret them.




92 Energy


CEO Siobhan Lancaster recently gave an interview highlighting the developments of recent months. On Feb 8th 2023 the drill campaign at the Gemini uranium project was started, so we could hear about results any day now.




Conclusion


In conclusion, 2023 is likely going to be the year that puts the uranium thesis to its test. Long term contracting is starting and the impact of this should at some point also move equity prices up. Being involved in uranium/nuclear stocks since mid 2020, my current thoughts around this thesis can be summarized in three points.


First, looking at charts, macro developments and sentiment makes me assume we are close to a bottom regarding equity prices. Holding on to uranium stocks has not been easy for me. Without a deep understanding of the sector and the nuclear fuel cycle, I likely would've been shaken out of the trade already.


Second, I decided to trim some of my uranium equities in the coming weeks/months. I am too overweight uranium currently in relation to what I think I should be or what the potential is. I like companies like SLX and will keep them highly weighted, but the miners and explorers have been disappointing.


Third, based on the commentary I have seen since 2020, I think that the share price performance expectations most uranium investors have of developers/explorers are too high. I am confident in the uranium market and think there could be a short term price spike (a la 2007), but the value creation will stem from a long term price stabilizing at a level that is healthy for well managed uranium companies. However, that in turn also means that other companies are the long term winners than those pushed on twitter/YouTube. Companies that are more than trading sardines, that know how to operate a real business and/or those that are also active in adjacent topics will likely do very well long term.


Until then...




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Update 7/12/2023: I sold most of my uranium mining stocks in recent weeks. The one company I will keep long term is Silex Systems, as it is a diversified business. I found other ways to play the trend of nuclear energy and also have deployed capital towards radiopharma/medical Isotope companies (Telix, Clarity, etc).




Sources:






Disclaimer: This blog post is purely my personal opinion and is not financial advice. Please do your own research, before taking investment decisions. I am long TLX, AEE, GLO, BMN, SLX, 1164, FIND, 92E. No payment or other incentives were received in exchange to write this article.

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