Coal Isn’t the Only Commodity Trump Is Saving

Written by Jason Simpkins
Posted September 27, 2018 at 3:18PM

Donald Trump campaigned on saving the coal industry.

And he’s followed through by carving out environmental regulations and boosting subsidies.

But coal isn’t the only commodity the president is saving.

He’s also looking to boost uranium.

Couple that with a natural supply-demand imbalance, and we’re likely to see a huge bounce in uranium prices over the next few months.

Start with this...

Uranium costs about $31 per pound to produce. That’s the global weighted average. And yet, it's currently trading at just $26 per pound.

Typically, metals don’t trade below their production cost for very long. When they do, it disrupts production. Mines are closed, insolvent companies go out of business, exploration projects are shelved, and supplies go down.

That’s exactly what we’ve seen with uranium.

Several years ago, there were 500 companies mining uranium. Today, there are just 20.

That’s drastic.

A crash in uranium prices (spurred by the Fukushima disaster) has removed 96% of suppliers from the market.

Now, 80% of the world's primary uranium supply comes from just 10 mines. And future global supply is dependent on just five newly proposed projects.

Furthermore, opening a new uranium mine is not a simple or fast process. It takes a lot of time and effort. In fact, it can take up to 20 years to go from discovery to extraction.

That hasn't been a problem to this point, because the world has had adequate reserves to make up the difference. But now, demand is exceeding supplies.

Any commodities investor will tell you that’s a good thing for prices.

But in this case, we also have a wild card. And that’s Donald Trump.

You see, top players in America’s uranium mining industry have filed a petition with the U.S. Department of Commerce.

It’s called a “Section 232 Petition.” Any industry in America can file this petition.

The goal of the petition is for the U.S. Commerce Department to limit the amount of a commodity being imported from other countries.

And given the president’s penchant for domestic production, it’s sure to be approved.

Swiftly.

Once that happens, production will be even more constrained and demand will skyrocket.

Again, it doesn’t take a seasoned investor to know that’s good news for any commodity.

In this case, uranium prices will almost certainly double from their current level, rising above $50 per pound.

Some forecast models suggest a price of $70 or $80. And even those might be underestimating it.

In 2007, uranium was trading at $138 per pound.

jmm-uranium-uraniumCould it get back there?

In short, yes.

In fact, it’s already started.

As recently as April, uranium was going for $21 per pound.

Today, it’s up at $26.

That might not sound like much, but it’s actually a 24% surge in just six months.

When the new rules go into effect, it’ll fly even higher.

The unfortunate thing is that uranium is not an easy commodity to invest in.

As I said, there are only a few mines, and many of them are foreign-owned.

But the good news is that our in-house commodities expert, Gerardo Del Real, has found the company that’s best positioned to profit from this massive imbalance.

And you can read his full report here.

Trust me, it’s worth a look.

Fight on,

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Jason Simpkins

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Jason Simpkins is Assistant Managing Editor of the Outsider Club and Investment Director of The Wealth Warrior, a financial advisory focused on security companies and defense contractors. For more on Jason, check out his editor's page. 

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