Cameco, on the other hand, posted a loss, because of its higher costs. In fact, Kazatomprom was highly profitable in 2021. The spot price averaged $32.3 / lbs, while Kazatomprom's AISC was around $12.6 / lbs. To give some numbers: in 2021, worldwide uranium production was equal to 48 thousand tons, of which 12 thousand tons attributable to Kazatomprom (total demand was around 68 thousand tons). Global production cost curve (KAP Investors Presentation) It also has the lowest costs, as evidenced by the global cost curve here below. Kazatomprom is the largest world producer, responsible alone for around 25% of total primary supply. I believe that the best way is a combination of physical uranium (such as the Sprott Physical Uranium Trust) and Kazatomprom (rather than Cameco). How to play the uranium thesis? Ideally, one would like to have high torque to any upside movement in the uranium price, while at the same time maintaining a good margin of safety in case the thesis is wrong (or it takes more than initially expected to play out). I therefore assign a high probability to a scenario where the new equilibrium price is well above $70 / lbs. As the uranium market is currently undersupplied, because of existing sources of secondary supply, sooner or later secondary supply has to run out, and therefore the uranium's price has to rise in order to incentivize new production.Īdd to this background: geopolitical uncertainties, logistical challenges, stricter environmental regulations, inflation, renewed interest for nuclear energy, and utilities returning en masse to the market. The uranium thesis boils down to the fact that the current price is below the production cost of most new primary supply. The reader is referred to that article for a more in-depth discussion. In a separate article, I lay out in detail the reasons why a significant increase in the uranium price is not only inevitable, but probably also imminent. ![]() The investing thesis in both Kazatomprom and Cameco is built on the assumption that uranium is in the early innings of a new bull market. ![]() ![]() Despite Kazatomprom being the better company, it is trading at a significant discount to Cameco, probably motivated by a combination of geopolitical factors, Russian exposure, lack of access by US investors, and poor liquidity due to the smaller float. Its main peer, Cameco (tickers: CCJ, CCO:CA), is a Canadian company trading on the NYSE and the TSX. It is listed on the Astana Stock Exchange and the London Stock Exchange (ticker: KAP). In this article, I will argue that Kazatomprom is indeed such a company and that now is a good moment to get long.īefore diving in, let me remark that Kazatomprom is a Kazakh company and it is not available for trading on American markets. ![]() If the company were also trading at an attractive valuation, it would be an extremely compelling investing proposition. The company has the best assets on the cost curve, has the biggest reserves, has the best margins, is the largest producer in the world, is committed to returning value to shareholders, is already a cash flow machine at current prices, and can ramp up production quicker and at lower costs than any competitor when the prices start rising. Imagine a mining company that produces a commodity critical to the world's energy stability, with growing demand, no real substitutes, trading at a price below the cost of production of new marginal supply.
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