Hi Mihail, Thanks for this report. In general, I agee with your assessment that we are in the early stages of a uranium bull market. The supply/demand deficit dynamics, currently at about 40M lbs of U and growing, are too great for one not to believe that uranium prices will not rise substantially in the coming weeks and months. The past two months or so has resulted in quite a downdraft of uranium equities, some of which have fallen up to 50%. For the two equities you mentioned, DNN and CCJ, both have been hit very hard since July. DNN in particular has dropped about 45% from about $2.30 on July 12 to about $1.58 on Sep 13. I would suggest that such a drop in a well managed company under the leadership of David Cates, ready to have permitting in place next year and production start in 2027, would be an extremely attractive acquisition of the stock, not necessarily a long term call or LEAP. One is getting the stock at a relatively cheap price and one doesn't have to worry about the time value depreciation as well. One can say pretty much the same thing about Cameco. Personally, I would rather have the stock than the call, since I will own a piece of the company rather than the option derivative. Turning to Kazakhstan, with its U production problems and the more difficult transportation logistics due to the Ukraine war , Cameco has already stated that U production costs at JV project Inkai are about the same as in the Athabasca Basic in Saskatchewan. Therefore it does not make sense for Cameco to continue this JV project, given the headaches it has been receiving lately from Kazatomprom. I would not be surprised to see Cameco and its partner on Inkai, sell the project, and use the proceeds to develop a greenfield project in Canada. Kazakhstan is being pressured politically to divert production to Russia and China. It would also not surprise me to see Kazatomprom announce that they plan to delist from the London Stock Exchange and revert back to a private state-owned enterprise. In this manner they no longer have to deal with the burden of public company reporting requirements, able to make choices and management decisions better aligned with the interests of the government of Kazakhstan (also from pressure of China and Russia) rather than foreign shareholders abroad. This would certainly cause an upheaval in the uranium market. We could see another surge in uranium spot prices to $100 or more.
I use LEAPS calls because they match my goals, skills, and risk tolerance. As you said, holding equity also has advantages.
In the previous Chapter on uranium, I mentioned Kazakhstan losing its competitive advantage. As you pointed out, Cameco has multiple reasons for exiting from Inkai JV. I guess in the coming quarters, we will see changes in the uranium landscape. KAP being delisted from LSE is an interesting scenario. Nevertheless, it would not shock me, given the high turnover in KAP's top brass.
Hello Mendo, It is becoming increasingly difficult for Kazatomprom to ship uranium production to the West, as has been pointed by several articles in the western press, and by Kazakhstan itself. Almost all new production, which has been curtailed by the sulfuric acid deficit and also production infrastructure problems, is now flowing East, not west to Russia and China. As I pointed out, Cameco says it is no longer cheaper to source uranium from its Inkai JV, and was caught by surprise when Kazatomprom (KAP) announced that new production would go to Russia and China. So, given these new production dynamics from Kazakhstan, why would Cameco continue its JV production— it doesn’t make sense. Cameco’s and Orano’s withdrawal from Kazakhstan would precipitate a review of Kazatomprom’s LSE listing. The pressure being put on Kazakhstan to shift production to Russia and China, given their need for lots of uranium to support their aggressive nuclear plant construction programs, would indicate that KAP no longer considers western utilities as a priority customer. Therefore why should KAP continue with its LSE listing when it is now focused on production for its two biggest clients? Also, the announcement by Mr. Putin that Russia may restrict uranium exports to the west seems to coincide with KAP’s announcement of logistical difficulties in shipping uranium to the west via the Tran-Caspian route. A coincidence? I don’t think so.
Delisting KAP from LSE is a known-unknown variable. As such, we know its consequences (to a certain degree) but do not know the chances of happening. That being said, take my opinion with a grain of salt.
I do not think delisting will happen, at least not initiated by KAP. The LSE listing gives KAP access to fresh capital, which is a huge advantage for a Russian-influenced company. If KAP walks away from the LSE, panic will be sparked among its western JV partners and investors.
On the other hand, KAP is listed on German exchanges. They can partially offset the impact of LSE delisting. If delisting happens, I believe shares of individuals purchased from LSE will be transferred to German exchanges.
Let's see how it plays in the uranium thesis. At any time, a new geopolitical variable can emerge and reshuffle the scenarios.
Hi Mihail, Thanks for this report. In general, I agee with your assessment that we are in the early stages of a uranium bull market. The supply/demand deficit dynamics, currently at about 40M lbs of U and growing, are too great for one not to believe that uranium prices will not rise substantially in the coming weeks and months. The past two months or so has resulted in quite a downdraft of uranium equities, some of which have fallen up to 50%. For the two equities you mentioned, DNN and CCJ, both have been hit very hard since July. DNN in particular has dropped about 45% from about $2.30 on July 12 to about $1.58 on Sep 13. I would suggest that such a drop in a well managed company under the leadership of David Cates, ready to have permitting in place next year and production start in 2027, would be an extremely attractive acquisition of the stock, not necessarily a long term call or LEAP. One is getting the stock at a relatively cheap price and one doesn't have to worry about the time value depreciation as well. One can say pretty much the same thing about Cameco. Personally, I would rather have the stock than the call, since I will own a piece of the company rather than the option derivative. Turning to Kazakhstan, with its U production problems and the more difficult transportation logistics due to the Ukraine war , Cameco has already stated that U production costs at JV project Inkai are about the same as in the Athabasca Basic in Saskatchewan. Therefore it does not make sense for Cameco to continue this JV project, given the headaches it has been receiving lately from Kazatomprom. I would not be surprised to see Cameco and its partner on Inkai, sell the project, and use the proceeds to develop a greenfield project in Canada. Kazakhstan is being pressured politically to divert production to Russia and China. It would also not surprise me to see Kazatomprom announce that they plan to delist from the London Stock Exchange and revert back to a private state-owned enterprise. In this manner they no longer have to deal with the burden of public company reporting requirements, able to make choices and management decisions better aligned with the interests of the government of Kazakhstan (also from pressure of China and Russia) rather than foreign shareholders abroad. This would certainly cause an upheaval in the uranium market. We could see another surge in uranium spot prices to $100 or more.
An excellent comment.
I use LEAPS calls because they match my goals, skills, and risk tolerance. As you said, holding equity also has advantages.
In the previous Chapter on uranium, I mentioned Kazakhstan losing its competitive advantage. As you pointed out, Cameco has multiple reasons for exiting from Inkai JV. I guess in the coming quarters, we will see changes in the uranium landscape. KAP being delisted from LSE is an interesting scenario. Nevertheless, it would not shock me, given the high turnover in KAP's top brass.
why would they delist it? and what would happen to shareholdings bought on the LSE?
Hello Mendo, It is becoming increasingly difficult for Kazatomprom to ship uranium production to the West, as has been pointed by several articles in the western press, and by Kazakhstan itself. Almost all new production, which has been curtailed by the sulfuric acid deficit and also production infrastructure problems, is now flowing East, not west to Russia and China. As I pointed out, Cameco says it is no longer cheaper to source uranium from its Inkai JV, and was caught by surprise when Kazatomprom (KAP) announced that new production would go to Russia and China. So, given these new production dynamics from Kazakhstan, why would Cameco continue its JV production— it doesn’t make sense. Cameco’s and Orano’s withdrawal from Kazakhstan would precipitate a review of Kazatomprom’s LSE listing. The pressure being put on Kazakhstan to shift production to Russia and China, given their need for lots of uranium to support their aggressive nuclear plant construction programs, would indicate that KAP no longer considers western utilities as a priority customer. Therefore why should KAP continue with its LSE listing when it is now focused on production for its two biggest clients? Also, the announcement by Mr. Putin that Russia may restrict uranium exports to the west seems to coincide with KAP’s announcement of logistical difficulties in shipping uranium to the west via the Tran-Caspian route. A coincidence? I don’t think so.
what do you think, why would they delist it? and what would happen to shareholdings bought on the LSE?
Love your questions.
Delisting KAP from LSE is a known-unknown variable. As such, we know its consequences (to a certain degree) but do not know the chances of happening. That being said, take my opinion with a grain of salt.
I do not think delisting will happen, at least not initiated by KAP. The LSE listing gives KAP access to fresh capital, which is a huge advantage for a Russian-influenced company. If KAP walks away from the LSE, panic will be sparked among its western JV partners and investors.
On the other hand, KAP is listed on German exchanges. They can partially offset the impact of LSE delisting. If delisting happens, I believe shares of individuals purchased from LSE will be transferred to German exchanges.
Let's see how it plays in the uranium thesis. At any time, a new geopolitical variable can emerge and reshuffle the scenarios.