| Dear John, We won’t know whether the Fed rate hike decision will launch a new gold rally for a few days, and perhaps weeks.
So I’m going to focus this issue on another “yellow metal”...and one that’s heating up right now. The uranium sector — which has been “next year’s big story” for about five years by this point — was limping along in its usual manner in recent months when one big piece of news, then another, suddenly hit the market.
First, as I reported in these pages last month, Cameco announced in early November that it was shutting down its McArthur River mine. This was the world’s largest uranium mine, responsible for about 11% of global production.
But then further impetus was provided on December 4 when the world’s largest uranium producer — Kazakhstan’s state-owned Kazatomprom — announced it would cut uranium production by 20% for the next three years. This will remove about 7.5% of annual global production from the market. Analysts estimate that these two production cuts will remove much, and perhaps all, of the oversupply of uranium.
In short, the global uranium market has, in a flash, moved from oversupply to essentially a deficit. As you’ll remember from my previous report, the long-term investment case for uranium revolves around the demand side of the equation. Rising demand and limited supply response has meant that we’ll see much higher prices...eventually. But what we have here is a shock on the supply side of the price equation.
Despite the long period of depressed uranium prices, we haven’t seen much impact on global production. That’s because utilities locked in long-term supply contracts years ago, when the price was much higher.
So producers have been merrily mining away, fulfilling these contracts at prices far higher than current “spot” prices. And there has been little pressure to reduce supplies.
But these long-term contracts are set to roll-off over the next few years, forcing utilities to go back into the market. And big producers like Cameco and Kazatomprom don’t want those utilities to start signing contracts while the uranium price is still at clearance-sale levels.
Frankly, their moves to drastically curtail production now, while surprising, are perfectly understandable.
In response to these developments, the spot uranium price has risen from around $20/lb to $26.50, or about 33%, with much of that move coming after the Kazatomprom news.
The uranium juniors have responded similarly, with most rising between 25%-35% since the Cameco announcement. Now, this is a short-term, somewhat knee-jerk reaction to the news, and I do expect some consolidation to the big price moves over the coming weeks.
Of course, we’ve had a half dozen well-positioned uranium juniors in our Gold Newsletter portfolio, awaiting the big, long-term move in the price of uranium. Thus, subscribers who have followed our recommendations have already benefited significantly from the recent move in the uranium market.
I do believe there are more and bigger gains to come in uranium and our recommended companies. And some of our uranium plays are making big news of their own. But for now, as I noted last month, I’m recommending that investors refrain from chasing the current price spikes and wait for the market to calm down a bit. Remember, this development isn’t the big move in uranium that we’ve been predicting and waiting for.
Our thesis has revolved around the inevitable, and now imminent, expiration of utility supply contracts. When the utilities are forced to return to the market to lock-in their fuel, they’ll be bidding against each other for the limited supplies available.
Now, thanks to Cameco and Kazatomprom, those supplies will be even more limited...and the price response will be even greater.
These two production cut-backs may prompt some of these utilities to begin moving sooner, but the big shift toward re-supply should occur over the next two years.
Two things are obvious: The lows in uranium are behind us...and when the big move comes, you’ll want to be positioned in the best uranium juniors.
As I’ve stressed, the last bull market in uranium saw over 400 uranium juniors sprout up like mushrooms after a summer rainstorm. And virtually all of them rose significantly in value as investor euphoria (and of course the uranium price) lifted all boats.
In the next “uranimania,” all that investor attention and money will be focused, at least initially, on the dozen or so uranium juniors that have survived.
The good news: All of these companies have progressed to the point where they’ve at least identified large-scale resources. And most are either in production or on the verge of it.
So they will benefit immediately — and tremendously — from the next uranium bull market.
This is why I’m recommending that investors look to patiently accumulate the best-positioned junior uranium explorers/developers/producers over the coming weeks, as the current excitement wanes a bit.
More specifically, I cover all of our recommended uranium plays in our next issue of Gold Newsletter. This will be our annual blockbuster, year-end double issue that will feature full coverage of this year’s New Orleans Conference...plus my specific recommendations for year-end junior mining bargains in not only uranium, but also gold, silver, lithium and cobalt.
Frankly, it’s the best value in investment publishing. If you subscribe to Gold Newsletter right now, you’ll receive this special double issue when it’s released later this week.
Not only that, I think it’s so important that you take advantage of this opportunity...to get my year-end bargains as well as the tremendous value of our New Orleans Conference coverage...that I’ll extend my offer to subscribe at half price.
Just click on the link below to capture a full year of Gold Newsletter for pennies on the dollar. All the best, 
Brien Lundin
Editor, Gold Newsletter
CEO, the New Orleans Investment Conference
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