Imagine risking everything you own by investing it in just one commodity.
And when I said everything, I meant it. We’re not just talking about the cash in the bank, but selling all of your assets as well–including your house.
Most people would cringe at such a bold move.
For Kyle Kimmerle, however, it was a risk worth taking. And that’s exactly what he’s done. He’s put every last penny his family owns into staking out uranium claims in Utah.
But this wasn’t some craps shot in a casino. He’s betting the farm on a metal that has experienced some dramatic price jumps over the last year.
I’m referring to uranium’s massive 1,842.8% gain since 2000’s price of $7 per pound. Yet despite this rise, it’s getting a surprisingly small amount of attention. What do you think the media would do if oil had a similar growth and cost us $388 a barrel today?
I think it’s safe to say we wouldn’t be reading about anything else.
The fact is that uranium is still in the beginning of its bull market. And people like Kyle are going all-in on this commodity.
Personally, I don’t blame them.
If I can be sure of one thing, it’s that uranium is still extremely undervalued. Last year, I’ve read reports from companies like Merrill Lynch that underestimated yellowcake. They thought uranium was going to average $75 a pound in 2007 and $80 a pound in 2008. Afterwards, they predicted uranium to fall back to $75 per pound by 2009.
Although I don’t share their bearish forecast for uranium, I’ll admit that I felt a slight correction would have taken place.
So far, yellowcake has proved us all wrong.
Uranium rose to $136 a pound recently. I’ve been pleasantly surprised so far, but here’s the thing: the boom in uranium is going to keep growing.
Why would I say that?
The answers rests on just one factor–simple economics. Our global demand for uranium is over 133 million pounds per year, yet production from mines has consistently fallen short of meeting it.
And it’s this difference between supply and demand that has been the reason for uranium’s push. Cameco just recently reported that demand for yellowcake is going to continue to outstrip production for another ten years!
Like I’ve said before, the bull market for uranium is only just starting.
Uranium is used primarily for nuclear fuel, so we can expect any growth in nuclear energy to have a direct impact on its price.
Over 150 new nuclear reactors are either planned or currently under construction around the world. And that’s not taking into account the hundreds more that will be built within the next few decades. But it’s not surprising the pace at which nuclear energy is growing. It offers us a massive amount of clean and cheap energy.
The Last Investment You’ll Need to Make
The question for you, however, is how to approach uranium as an investment. There’s been a huge amount of companies that are only out there for a quick pump and dump.
And to be honest, this market isn’t for everyone. There’s a lot of risk that comes with it. But some of that risk can be mitigated through smart investing.
Without a doubt, the most important thing to find out about a company is its management. I always look for a group of leaders that doesn’t just have a solid plan to bring a new mine into fruition, but also whether or not they’ve had previous success.
Of the hundreds of uranium companies that have started up in the wake of this bull market, there’s a vast majority who won’t even make it into production.
Another vital factor I look for is whether the prospective company has decent properties. Does the company have reserves in place already? Is there a contiguous piece of land with a massive amount of reserves? One thing a uranium company needs is uranium!
Aside from those two primary areas, there are other things to keep an eye out for. Clearly they need to have a decent financial record. Also, I always look to see if the company is capable of financing its projects. They could be sitting on an enormous amount of uranium, but it’s nothing more than a bunch of rocks unless you have the cash to get it.
For speculators like Kyle, uranium is simply too good an investment opportunity to pass up, and I have a feeling that in the next few years we’ll be reading about the millions he made off of yellowcake.
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Until next time,