21-Mar-2021: Since making a low back in early November 2016, Uranium futures have been trending higher, as the graph below demonstrates. If the futures price breaks down below that channel, like to US$25/pound, that would be bearish, however if they can maintain that upward trajectory, the upside, even within that rising channel, looks pretty good.
It is pleasing to see that the majority of ASX-listed uranium project developers have enjoyed healthy positive reratings of late, with VMY rising +300% from 3.5 cps to 14 cps in the past 4 months (since 26-Nov-2020). These are highly speculative plays of course, as none of them are currently producing anything except reports, presentations and awareness of the future opportunities. They are not uranium producers. They are uranium explorers and project developers.
It's important to note that uranium is not generally traded at the "spot" or futures price. It is sold under long-term supply contracts as the users of uranium - who are mostly global energy companies running nuclear power plants - need to lock in certainty of supply. However, the prices involved in those contracts - as new contracts are being negotiated - have also been rising recently, as the previous contracted prices had been below the marginal cost for mining companies to produce uranium - resulting in so many uranium mines being put into care and maintenance (being "mothballed" until the price rises back up to where it makes economic sense to start producing again). The higher prices being realised in recently inked contracts are giving the industry a huge shot in the arm which has translated into renewed confidence after a period of years in which the vast majority of investors had given up on the sector and sold out). Uranium companies are certainly runing now.
VMY is my favourite in the space, firstly because of their Mulga Rock and Aligator River project economics, but secondly because of Mike Young, who I've posted straws about here previously. I've followed him since his BC Iron days and have a lot of respect for his knowledge, ability and tenacity. You couldn't ask for a better person to head up a company liked this one. I have made money in prior years from trading VMY, and also BC Iron and Cassini Resources (now a subsidiary of OZL - OZ Minerals) when Mike was running those companies.
All that said, I'm not a current holder of VMY. I wish I was, but I sold out at lower levels to rotate the capital into the gold sector, which played out reasonably well in the short-term, but not in the past couple of months. I'm sticking with gold at this point, as I think the risk/reward in the gold sector is more favourable than in the uranium sector, however I can certainly see why uranium bulls are getting a little excited at this point.
