Thread by @BambroughKevin

Morning uranium thoughts:

Part of me wants to say I’m surprised how much push back I’m getting publicly and privately for asking questions and just trying to get up to speed on $ccj $cco Cameco’s current position in the Uranium space, it’s pros cons, valuation and such.

But I’m not surprised because I’ve seen this and done this so many times over the years in so many sector’s. With a $10b market cap they have a lot of shareholders that want the stock to fly and they also have the most liquid options trading in the sector so lots of call owners

Anyhow, uranium Twitter should not be a cult where so called experts only say good things about all stocks and we work together to suck in as much capital as possible for the sector so that all boats lift together. Pushing for that sort of cohesive one sided culture…

Will only lead to bad things, as capital will he misallocated, loses will he suffered by the naive and there will be a loss of credibility by the advocates of the sector (and bad karma)

One thing I see playing out more and more is hedgefunds will be attracted to the sector because of both up and downside vol plus the potential for massive long term gains and its squeezability. So we need to prepare for them and ‘it’

As I think about how this sector will be ‘games’ and traded by the big guys I’ll offer some insights. Many in uranium on Twitter seem to be solely focused on it and maybe another sector or two. Big hedgefunds never will. They have all sorts of competing trade ideas being created

So even those that are long a basket of stocks plus $u.un or physical uranium uranium will want to try to trade spikes. The first thing they will do is lighten up on stocks that have gone up a lot fast especially the ones they feel have stretched valuations.

When the market breaks (assuming they timed the peak well) and the stocks start to fall back and charts begin to look scary they will be looking to reposition capital back into the stocks they are most interested in. Hence, why looking at relative strength works well

One thing we always did at Sprott is when we thought stocks got a head of a commodity we would buy the commodity and sell stocks. When the correction ended we would sell some physical and load up on our favourite stocks

This will happen in the uranium sector now for sure. Some funds will lean on $u.un and be happy to see the premium erode or disappear for a few days cause it will scare out the weak hands. They will be on the bid hoovering up stocks for the next up leg as people panic

I think you’d all be suprised by the number of funds that will do this to help their performance and deliver returns and generate incentive fees. Even the most bullish long term players still trade at extremes. Part of the reason many hedgefunds go quiet or won’t comment

When they are active they don’t want to admit they are buyers or sellers and create conflicts. They also can change there minds at anytime and don’t want to be restricted on a stock cause they spoke about it in the media

Anyhow, the majority of people like to see people like myself getting up to speed on Cameco and I’m happy to talk about anything good or bad on any stock in the sector. The more information we all have the better. Like most when I jumped on the uranium trade initially…

I got long $cco and I also tried to reach out to management meant to get an idea of what they were thinking and mostly to see if I thought they would show patience this cycle and wait for $65+ to sign any new contracts. I wasn’t able to get through to the CEO

And didn’t get comfortable, when I saw how many lbs they contracted in the first half I was done and moved to stocks with more leverage to the uranium price along with physical uranium. I’m now looking at Cameco more to see how/if they will make the turn and become more bullish

Seems like they won’t as recent conference call has them stating that they believe a price spike to $100/lb will only last a few days is and trade little lbs.

But, also wasn’t following Cameco the much at all over my the last decade cause the sector was in bear.

So I’m digging in, I’d like to fully understand what uranium price will trigger more aggressive contracting and the restart of Mcarthur River. Plus the costs and risks associated with that. I was surprised to read about the significantly different geology of the 4th zone

Some ccj longs don’t want this talked about and they are engaging in shoot the messages tactics. Just like my questions about the contract book, the issue will not be fully addressed. They will simply say, it’s a non-issue, it’s been solved. Nothing to see here

It won’t be addressed until the mine is operating as we see how it performs. All mining has risks and no one in their right minds can argue that this zone isn’t more risky. I’m not sure about what the actual feasible ramp out schedule is but the notes posted by DB seem logical

They will want to go slow and use caution. Perhaps 3-4mln pa rate at first 18months in and 36months for full ramp up if things go well. In conclusion I find this extremely bullshit for #uranium probably the most bullish supply side argument I’ve read this cycle.

If a major mine has any trouble, not just Mcarthur but any major mine this market will explode higher. Cigar lake was the catalyst last cycle when it flooded. When a market is in shortage and inventories are tight when the something that might go wrong goes wrong it explodes

And every cycle in nearly every commodity has something go wrong. I’ve was called ‘lucky’ many times last cycle after I netted great quick gains in commodity after commodity. But, you got to plan to be ‘lucky’ in the resource world

One coal cycle it was floods in Australia (record rains, seem to happen to every 4/5 years FYI) another it was snowstorms in China, in potash it was a major mine flood, gold moved on strikes as has copper. Every sector has tales of a spike because of something no one predicted

But trust me on this. It’s very predictable that a single perhaps unpredictable supply shock will occur in this cycle and it will blow the doors off the market. Lead to another gift double like we got when the Sprott atm turned on

Enjoy your day!