Uranium – The Worst Bear Market Ever?

by FI Fighter on September 19, 2016

in Uranium


Last year, I thought that the bear market in precious metals was just about as bad as any that I have ever seen in my life. As I have often emphasized in the past, being able to buy up assets for pennies on the dollar should make any investor feel like a kid in the candy store. For certain, in September 2015, I was having the time of my life scooping up assets during a period in which almost nobody else cared…

Fast forward to 2016, and everything that went on during the Depths of Despair is now all but a distant memory.

The brutal bear market in precious metals ended earlier this year… And we are now off to the races again…

And for the most part, many other commodities (lead, zinc, lithium, etc.) have also started to rebound this year…

But when it comes to uranium, man, have you ever seen an asset more hated by the markets (and investors)?!?

I sure haven’t…


The current spot price of uranium is just $25.94/lb

Many of the majors (and the lowest cost producers) can’t make money selling at today’s prices!

From Ur-Energy.


Yes, we all know that the “cure for low prices is low prices“… But as is often the case, “the markets can stay irrational longer than you can stay solvent.

For the most part, any investor who was bold enough to try and venture into the uranium space these last few years has been punished mercilessly by the markets…

Right now, as things currently stand, there is simply enough supply to meet demand… Sure, there might be lots of growth in store for the future (new reactors + Japan re-starts), but until new utility contracts are signed and the spot price starts moving rapidly in the upward direction, most everyone is just not going to care at all about the uranium story…

From Uranium Energy Corp.



Wake me up when the stocks start flying?

They have… in the downward direction.

Just last week, Energy Fuels (UUUU) shocked the markets (and investors) by announcing a $10 million bought deal offering.


It wasn’t so much surprising that the company needed to raise funds (yet again), but the terms of the offering…

$1.80/share (essentially at 52-week lows!)

1/2 warrants good for 5 years (oh my!) at an exercise price of $2.45/share




It’s opportunities like the above that make me wish I was an accredited investor who was qualified to participate in private placements (next cycle, for sure!).


Anyway, for anyone who has been following the gold and silver space at all this year, you’ll know that offering warrants (even just 1/2 warrants) is no doubt a “cardinal sin” these days… Why do so when it’s so freekin’ easy to raise capital?

Don’t you just love bull markets? Capital is just so readily available…

But less we forget, not all commodities are on the mend this year… The Energy Fuels financing was kind of a wake-up call for me and a reminder that for some materials, like uranium, the agonizing pain of having to endure a prolonged bear market is still alive and well…

Seriously, you would have to believe that no management team is insane (or stupid) enough to do a deal at 52-week lows (AND offer 5-year warrants!) unless the circumstances were indeed that bad… and dire.

The terms of the offering are just way too generous for anyone to issue in a “normal” market environment… Without putting things in the proper context — What a slap in the face to your existing shareholders, it must feel like!

Not surprisingly, then, shares of UUUU tanked the following trading session proceeding the announcement, finishing the day down over -25%!

Shares of Energy Fuels are now trading at NEW 52-week lows!


I think it’s safe to say that existing investors were pretty pissed off with news of the latest offering… to say the least.

But for newcomers to the game?

Not so much…

In fact, the offering was increased to $13.050 million, due to increased demand.


Again, for anyone “late to the party”, that’s a pretty sweet deal… You’re getting shares at basically record lows and 5 year warrants to boot!

But damn, can you imagine all the backlash and “hate mail” that management must be receiving with their precipitously declining share price? The headquarters of Energy Fuels must not be so fun a place to be working at these days…

Anywho, I bring all this to your attention because as everyone who reads this blog knows, I’m a huge fan of brutal bear markets… Point blank, that’s just my absolute most favorite time to buy!

When nobody else gives a shit, I start tuning in with most interest…

No, I really can’t see the uranium market turning around anytime soon… But anytime you have a sector in deep liquidation, and with shares of a company selling off by over -25%… due to a financing event, I mean, you gotta start paying attention!

The reality is, in any bear market, basically anything management does is the “wrong” thing to do… But you know what? Once the sector finally turns (and you better believe that the sector will eventually recover because ain’t no uranium company making money selling goods at today’s prices), all this “doom and gloom” is very quickly forgotten…

It’s human nature to nitpick, scrutinize, critique, and make a whole lotta noise about every little last detail, until the macro story changes… and then all that stuff ends up not really mattering anymore… It’s so funny, because I so vividly remember what it was like investing in precious metals stocks last year, and everytime a junior had to raise capital, you had investors up in arms with rage about how these management teams were “a bunch of clowns/idiots” and doing such a HUGE disservice to their shareholders by diluting them into oblivion… Fast forward to now, and with Happy Days having returned to the precious metals sector, all those previous complaints have been transformed into cheers of joy… When investors are making money, management can almost do no wrong, and these same “clowns/idiots” have transformed into badass “rockstars”…

Go figure…


  • Bull market vs. bear market.
  • Making money vs. losing money.
  • Fear vs. greed.


It’s all extremely fascinating stuff…


I’m not saying now is the time to jump into uranium, but as you all know, if you want to make some serious coin in the mining space, you do so by buying at the Depths of Despair.

I’m not about to call no bottom in uranium (we could still have ways to go for all I know, and I have absolutely no clue), but no doubt, we are way closer to hitting rock bottom than we are at encroaching any kind of market top!

So yes, of course I am paying attention and watching uranium (and the mining stocks) with great interest.

Without question, at some point, the uranium sector will turn up again, Happy Days will re-emerge, and the investors daring enough to play ball when nobody else was willing to will make a huge fortune.

Uranium, you are no doubt the worst and most brutal bear market that I have ever observed in my entire investing career…


Fight On!

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{ 18 comments… read them below or add one }

1 Income SurferNo Gravatar September 19, 2016 at 6:58 am

Thanks for the post Jay. Uranium is one of the most interesting spaces and plays for me, because it applies to my deep value leanings. I’ve been watching the space for almost a year, but I haven’t seen the catalysts I need to make a move. Either demand has to grow substantially or supply needs to shrink. I know both are taking place, but at very slow rates

I think our group needs to keep spending time discussing this space. It will turn, and we need to be ready to pounce when it does! will talk soon


2 FI FighterNo Gravatar September 19, 2016 at 2:58 pm


Absolutely, we are talking about a deep value play here… One that might become even deeper value over the next 2 years or so… Investors who like to buy cheap goods have to be salivating over this bear market in uranium; whether you are a fan of the resource or not, it’s probably not going away anytime soon…

Yup, we will be discussing this over the course of many months, I’m sure. Looking forward to sharing new ideas.

All the best!


3 Rudy SMTNo Gravatar September 19, 2016 at 9:22 am

Hi Jay,

Thanks for sharing this article.

You might find interesting this company, it’s producing uranium at US$15.60 per pound.



4 FI FighterNo Gravatar September 19, 2016 at 3:01 pm


Thanks for sharing that company! I was unaware that they even existed.

I must say, it’s very surprising to read that anyone can make money at today’s prices, even if we are talking about low-cost ISR producers… It’s great that certain companies can, but even so, they are probably asking themselves, “How much supply are we actually even willing to sell?”

Nobody likes to sell off their assets at rock bottom prices, even if you have an abundance of resource… With mining in particular, it’s a perpetually depleting business, so I can understand why many producers are scaling back and waiting for Happy Days to return before really ramping up production.

Supply destruction can only lead to higher prices for any asset/commodity that isn’t going obsolete… As much as some people hate uranium, it’s not going away anytime soon, so no fears there.

It might be an agonizing wait for investors, but at some point, the sector will turn up again…



5 TTNo Gravatar September 19, 2016 at 11:15 am


Thanks for the great blog!

I´ve read your post about Global X Lithium ETF (http://www.fifighter.com/lithium/2016/05/the-global-x-lithium-etf-lit-why-i-dont-like-it/). I like the lithium play more than the Uranium (because its more understandable for me) but the ETF is not what it should be.

Is the Uranium Global X Funds ETF (URA) a better product than the Lithium sibling?

I´ve always been a passive index guy but now I´m looking opportunities to achieve financial independence sooner. Do you have some Uranium ideas that are better than the URA ETF? I missed the gold/silver train but I would like to find the next train before it leaves the platform 🙂 Thanks!


6 FI FighterNo Gravatar September 19, 2016 at 3:08 pm


At first glance of the Uranium Global X Fund, I would have to say that it looks far more appealing to me than their Global X Lithium ETF.

With the Uranium ETF, the largest position is Cameco, which is the top dog in the uranium space. The next largest holding is NexGen, and I really like that company since they own what is probably the best currently undeveloped uranium project in the world. So, we are already off to a much better start than in the case of the lithium ETF… which owns too many non-lithium plays (e.g. battery manufacturers).

Investing in uranium is somewhat “easier” since it’s an extremely small sector and there are really only a handful of viable options for investors.

All the best!


7 FinanzrNo Gravatar September 19, 2016 at 1:33 pm

I have some concerns with the Uranium-Bull-Market:
1) Most of new reactors are either built in China & Russia or by Chinese & Russian Companies – I suspect that the fuel will be supplied from Russian & Chinese sources and not by western uranium miners…
2) What happens with the Uranium demand until/after 2020 if China and Russia start closing the nuclear fuel cycle? Then there might be no extra demand to eat the current over-supply.


8 FI FighterNo Gravatar September 19, 2016 at 3:20 pm


1) Yes, there is lots of growth coming from China and Russia, but don’t discount India, UK, and other countries as well.

However, even if those countries get their supplies out East, about ~20% of US electricity generation comes via nuclear.

• US domestic production ~3.3M lbs of uranium/yr
• US utilities consume ~46.5M lbs of uranium/yr

Since much of our supply chain is coming from places like Kazakhstan, it’s probably safe to say that we need more domestic production… which would only support the bull thesis.

2) The current oversupply is due to the consequences of the Fukushima disaster which saw Japan shut down its entire nuclear fleet and negative, anti-nuclear sentiment reached over 80% in Japan shortly after… That was a “black swan” event that nobody in the industry could have forecasted coming.

But with production slowing down, that oversupply will probably get chewed up over the next few years, or next decade or so… The US/Russia HEU agreement also ended in 2013. The slide I cited in the article above shows that nuclear demand should grow at a modest 3.1% per year out until 2030 timeframe.

At some point, supply/demand should normalize and prices should start to recover again. I don’t have data in front of me, but from memory, I believe that most hard rock producers need anywhere between $50-60/lb to break even.

All the best!


9 AdrianNo Gravatar September 20, 2016 at 9:35 pm

Good points here. Also – Uranium provides for a large percentage of baseload power in North America. It’s either that or the lights go out. Option 2 won’t be allowed politically, so lights on and contracts renegotiated at some point.


10 FI FighterNo Gravatar September 27, 2016 at 10:35 pm

Great point Adrian!


11 SFtraderNo Gravatar September 19, 2016 at 2:57 pm

Hi Jay,

What sort of valuations, or catalysts are you looking for prior to jumping into the sector? With Energy Fuels at a $96M market cap, that just seems absurdly cheap to me given their ISR, conventional, and milling assets.


12 FI FighterNo Gravatar September 19, 2016 at 3:28 pm


That’s a great question! In terms of valuations, I think looking at infrastructure is a great place to start. For instance, Energy Fuels currently trades at a market cap of less than $100 million… Could they even build out their hard rock infrastructure (e.g. White Mesa Mill) for that amount of money? I asked management before in the past, but forget the exact figure they quoted me on that. I’m also guessing most of their uranium assets are being assigned near $0 book value…

With gold/silver mining companies, many were trading at negative enterprise values, which was my “go all in” signal to buy up hand over fist…

Comparing across other industries is also a good barometer… For instance, silver is currently booming, so many early stage exploration companies are trading at $50 million market cap range… In contrast, Energy Fuels is a proven producer that owns both hard rock and ISR assets…

You know a market is broken when a producer trades at a valuation more suited to that of a junior explorer in a normal market…

So, things like that… And compare EV/resource, EV/production, etc. to historical norms in the sector…

And looking at the previous share price/market cap highs of last cycle can give us an idea where we are currently at. During the last uranium bull, Energy Fuels was trading at over $200/share (factoring in reverse split)… And that’s before they acquired Uranerz ISR assets…

The uranium market is most broken today…



13 AdrianNo Gravatar September 20, 2016 at 8:55 pm

From $200 to $2.50ish…. quite the drop! 😀 and vice versa. I’d say the safest play is probably “U” ticker. Thoughts? Some names sticking out…


Also BRI – they have that u308 component mixed in.. mostly gold play though. But your portfolio is way above mine… so what do I know right? lol


14 FI FighterNo Gravatar September 27, 2016 at 10:36 pm


Thanks for sharing those names! In particular, I like NexGen from that list.

LOL, I think you probably know more than I do when it comes to uranium; I’m really just a noob, and I’m not familiar with a few of the names on that list 😉

All the best!


15 JamesNo Gravatar September 20, 2016 at 12:08 pm

Great post FI.

While U spot prices have been falling the stock prices of some U producers have stabilized (the exception for now being Energy Fuels). That suggests investors are starting to taking up positions in the U space. The big question is how long will the ample stockpiles of U take to work through. Last quarter Cameco, the largest U producer, had one buyer reneg on a long term contract. It remains to be seen if this is the start of a new trend that will extend the bear market for U. However, when the prices of U stocks move they tend to do so very quickly and explosively. I’m riding the precious metals bull for now, and plan to take some profits next year to allocate to the U sector as I agree with you the world will remain awash in U for the next 1-2 years.


16 FI FighterNo Gravatar September 27, 2016 at 10:39 pm


Definitely, this oversupply situation can easily drag out another 2, 3, 4, 5, or even 10 years… Nobody really knows, and right now it looks like Japan has been much slower than expected in ramping up re-starts of their nuclear fleet.

Uranium is a game only suited for the most patient investors… If one cannot tolerate day-to-day volatility and can’t wait 5+ years for a thesis to play out, this probably isn’t the right space for you.

I’m willing to play this game b/c I know these low price are not sustainable… Silver has already taught me how explosive the move to the upside can be when the spot price of a commodity starts to recover in a very thinly traded market… If investors thought silver was a small market, just look at uranium… It’s microscopic and there are only a handful of names out there to play this turn… In other words, if the sector rebounds, these stocks will SCREAM!



17 MichaelNo Gravatar September 20, 2016 at 12:56 pm

Hey Jay,
First off, I have read your blog for a while now and really, really like it! Lots of food for thought. But I have to disagree about your thinking about uranium:

I don’t like it. Fundamentally, nuclear power has had its peak, it is a dying industry (and, besides, I have massive ethical objections). Uranium prices and miners may indeed recover for some time, though. After all, the existing power plants will still need fuel for a few decades.

Building a new npp, that is (presumably) safe is prohibitively expensive. Nuclear powerplants are therefore economically no longer competetive, at least if built and operated by modern western standards. The best example are the outrageous subsidies that the british taxpayers are going to have to pay for Hinkley Point on order of their government. New npps can -today- only get built and financed if massively subsidized, built unsafe, or under purely political decisions (see esp. China).

A better investing idea would rather be the decommissioning industry for old npps. Hundreds of reactors will be switched off over the next 2 decades. Tearing down a million tons of partially contaminated steel and concrete is a difficult task indeed.

Another currently most-hated sector to look at instead is shipping, especially dry bulk shipping. But they will still need half a year or a year to find a bottom, imo.



18 FI FighterNo Gravatar September 27, 2016 at 10:41 pm


Thanks for sharing your thoughts. I see where you are coming from, and I do agree with you in many ways… For instance, I think clean energy via solar, wind, electric vehicles, etc. is going to be the underlying trend over the next few decades…

Nevertheless, I still think there is enough room for alternative players, such as uranium.. No, I don’t expect the same type of explosive growth, but demand is increasing steadily as well, with China/India/UAE/UK/etc. all construction new reactors…

Uranium is just very undervalued right now, which is why I’m interested… But my big bets with clean energy are clearly concentrated in the lithium space at this time.

All the best!


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