As part of this ongoing series, this blogpost will review new developments by Sprott and their Physical Uranium Trust (SPUT)in the uranium space. I’ve written about the trust in detail in a previous post. It’s an incredibly important investment vehicle in the uranium sector. Sprott Physical Uranium Trust (SPUT)To date, Sprott has accumulated 22.7 million pounds of U3O8 since inception in July 19, 2021. In total, they have 40.8 million pounds. The first 18.1 million was from Uranium Participation Corp (UPC). Therefore, the purchase average is 5.7 million pounds of U3O8 per month. If they keep this up for a full year, total would be 68 million lbs. in a market whose annual demand is 180 million, and primary production is only 120-125 million lbs. To continue these purchases, Sprott updated its prospectus with an amendment to increase the at-the-market equity program to $3.5 billion (up from 1.3 billion). Sprott stated in a recent video conference, the first 1.3 billion was almost used up. It’s a great indicator of the high demand of SPUT. “Since launching the At-the Market offering, SPUT has issued 87 million Units for gross proceeds of approximately US$987 million, which has resulted in the purchase of 21.5 million pounds of U3O8. SPUT now holds approximately 40 million pounds of physical uranium on behalf of our clients.”
Sprott also noted in their 2021 Q3 conference call that the trust had grown to $2 billion dollars in net asset value from $630 million at inception, gaining the attention of institutional money on a global level. Basically, the fund still has a lot of growth ahead. When it’s a $2 billion fund, it is much easier for big money to pour $30-50 million dollars in a trade. Snowball effect. NYSE Listing and Utility ResponseIn addition, the NYSE listing is progressing and Sprott hopes to submit the application by the end of the year. Once the listing is complete in hopefully mid-2022, even more money can pour in and be used to buy more uranium. Until then, Sprott continues to buy U3O8 in the spot market. All the above should be alarming. Utilities are also taking notice, and it appears there is growing concern about the availability of supply into the future. In a certain video interview, Cameco’s Grant Isaac has stated some utilities are delaying advertising RFPs (Request for Proposals) and directly approaching uranium suppliers. This allows them to avoid signaling to the financial markets their intents as RFPs are more official and public. Instead they’re using back channels to securing supply. North Shore Uranium Mining (URNM)Sprott has also agreed with North Shore Indices, Inc. to acquire an exclusive license to use the North Shore Global Uranium Mining ETF (URNM). URNM is the purest uranium miners ETF available in the market with physical uranium holdings like SPUT and Yellow Cake PLC. For background, URNM started in December 2019 with net assets at $30 million. It is now at $900 million, approaching $1 billion. Like SPUT, going into billion-dollar net asset territory allows big money to flow in. It should be completely Sprott’s by Q1 2022. It will still be the same ticker symbol, but re-branded as Sprott’s Uranium Mining ETF. Essentially, Sprott will control TWO synergistic investment vehicles. Together, they’re self-reinforcing and open to global, institutional money as well as smaller, retail investors: - Investors buy and trade SPUT, resulting in premiums or discounts to NAV. Through its mechanics, SPUT sequesters uranium, and helps raise the uranium price.
- As price rises, uranium mining equities rise as well. With URNM, investors have an index ETF that is large enough for institutional money to flow in and buy uranium miners and uranium holding companies SPUT and Yellow Cake PLC. Both companies buy uranium to hold and sequester long-term. SPUT is especially important because there is no mechanism to sell uranium later.
- These events would feed each other, back and forth.
Final RemarksKeep in mind, Sprott serves over 200,000 global clients with $19 billion+ in assets under management. Once they begin seriously marketing BOTH uranium options to them, it will help move the share prices up. The larger and more mainstream uranium gets, the closer we reach a critical mass when the market “wakes up” to the trade. Additionally, investors who own the uranium companies held within UNRM benefit as “dumb money” flows into the index. Therefore, share prices of companies within URNMs portfolio would go up, regardless if they deserve it. Due diligence is still advised (don’t rely on dumb money for your returns if you buy individual companies). Still early. Still bullish. Current Uranium Spot Price: $47.00 Disclosure: I hold beneficial long-term positions in uranium equities, going back to January
https://esurien.com/2021/11/uranium-story-part-15-sprott-uranium/
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