There's a sense among some investors that uranium is a contrarian buy today. With prices languishing near decade lows, and multiple projects globally having shut their doors over the last few years.
But news this week sounds a note of caution for anyone investing here.
That comes from the world's largest uranium-producing nation, Kazakhstan. Where it appears the downtrodden state of the market hasn't put a dent in output.
Local press reported that Kazakhstan's uranium production for Q2 actually rose 4% as compared to the same period of 2014. Hitting a total of 5,883 tonnes. Related: Is This The Best Play In U.S. Oil?
That's an increase of 233 tonnes -- or over 500,000 pounds -- for the quarter. Annualized, that means Kazakhstan is pumping out 2 million pounds more uranium than it was last year.
And that's a critical observation. Because it shows the uranium "downturn" isn't affecting the entire sector evenly.
Especially Kazakhstan. Which is one of the world's lowest-cost production centers for uranium -- thanks largely to the geology of the massive deposits here.
And as this week's news shows, Kazakhstan's producers are doing just fine at today's prices. Even pushing forward with production expansions. Related: How Much Pressure Will Iran Put On Oil Prices?
Same goes in the world's other big uranium district -- Saskatchewan, Canada. Where major producer Cameco reported late last month that its production is also rising significantly.
Cameco's uranium output during Q2 jumped 35% as compared to the year-ago period. Thanks to its new Cigar Lake mine coming online, as well as rising output from its cornerstone McArthur River mine.
These mines are some of the richest in the world, and have market-leading economics. Allowing Cameco to ramp up output even at $35 uranium. Related: Germany Struggles With Too Much Renewable Energy
Canada and Kazakhstan are in fact unique globally when it comes to uranium production. With most of the world's additional mine capacity coming at much higher production costs.
It's those higher-cost mines that have been going out of business lately, in places like Africa and Europe. And the news above shows that betting on these swing producers to return may not bear fruit any time soon.
Bottom line: there are opportunities in uranium, in very specific places on Earth. Choose your spots carefully.
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Here's to ramping up,
Dave Forest
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