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Rob Crayfourd & Keith Watson: Uranium Series Part 9: Kazatomprom is a Game Changer for the Uranium Market

Robert is a geologist while Keith started with a background in Applied Physics. They are both co-Fund managers for New City Natural Resources Geiger Funds and have backgrounds as analysts in the financial space.

They discuss how the uranium market appears to be consistently tightening as reactors are continuing to be built. There are 58 reactors under construction and far more being planned. Much of this is driven by China who seeks to reduce pollution. It’s the second cheapest power production method and the most environmentally friendly concerning carbon emissions. India has a similar story but not on the same scale.

Japan has nine reactors back in operation with a further six approved for restarts with a number under review. There is some difficulty in knowing the full-time line for reactor restarts. The court system in Japan has approved some restarts. Twenty additional reactors will have to come online in the next few years to meet their government’s goals. European nations will likely have a hard time scaling back nuclear without compromising their environmental emission goals. It’s pretty easy to make a bullish case for nuclear overall.

Incentive pricing and long-term contracts are required for uranium production restarts. For new projects, most need over $50.00 uranium to begin. Once some additional excess inventory gets depleted we will be looking at an increasing cost curve for uranium. Uranium demand is in-elastic a doubling or quadrupling of price will make no difference to the demand picture.

KazAtomProm is becoming more aggressive in the marketplace by reducing their inventories and issuing shares and there will be a shift from spot sales to term contracts.

Time Stamp Reference:
00:40 – Introductions and backgrounds
02:30 – Uranium market is getting tighter, and demand is increasing.
05:10 – Reactor restart timelines are difficult to obtain.
05:50 – Japan has nuclear in their strategic plans.
07:50 – Demand reduction risks could come from Germany and France.
13:10 – What will send the price upwards?
17:45 – KazAtomProm is increasingly competitive business wise.
19:45 – Uranium not correlated to the regular markets.
22:30 – Cameco will not restart McArthur River until above $45.00
23:45 – NexGen is an attractive resource.

Talking Points From This Week’s Episode:
• Reactors are being built in China and India with more planned.
• Japan needs twenty additional reactors to meet nuclear energy targets.
• Overall there is a ground-swell in favor of nuclear worldwide.
• KazAtomProm is becoming much more aggressive.
• Incentive pricing and long contracts are needed to grow production.

Keith Watson is a co-Fund Manager for City Natural Resources High Yield Trust, Geiger Counter and Golden Prospect Precious Metals. Keith joined CQS in July 2013 from Mirabaud Securities where he was a Senior Natural Resource Analyst. Prior to Mirabaud, Keith was Director of Mining Research at Evolution Securities. Previous to this, he was a top-ranked business services analyst at Dresdner Kleinwort Wasserstein, Commerzbank and Credit Suisse/BZW. Keith began his career in 1992 as a portfolio manager and research analyst at Scottish Amicable Investment Managers. Keith holds a BSc (Hons) in Applied Physics from Durham University.

Rob Crayfourd is a co-Fund Manager for City Natural Resources High Yield Trust, Geiger Counter and Golden Prospect Precious Metals. Prior to joining CQS in 2011, Rob was an analyst at the Universities Superannuation Scheme and HSBC Global Asset Management where he focused on the resource sector. Rob is a CFA charterholder and holds a BSc in Geological Sciences from the University of Leeds.

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