I’ve been getting lots of questions about this recent email ad touting a “$1 Stock that’s about to go vertical,” so I took a quick look — and it turns out that the pitch is really the ad they’re sending is just a lightly updated version of the “Obama’s Secret Pipeline” ad that they started running back in the Spring.
Do you remember that one? It might be that a lot of you don’t, because I posted the solution in an article for the Irregulars back in May — so although some of the facts on the ground have changed a little bit, I thought I’d just re-share the solutions with you (along with a quick update).
So first, here’s an excerpt from that report to the Irregulars that I published on May 22 — this hasn’t been updated or revised, but I’ll post a little update at the bottom:
I mentioned uranium and I thought I’d give you the solution you’re looking for about the “Obama’s Secret Pipeline” uranium stocks, and let you know that in the face of what seems to me to be continually increasing odds of higher uranium prices over the next several years I’ve put on some small, speculative positions in a couple of the little miners being teased… I’ll be quick with this one, but let me tell you what the stocks are first:
Nick Hodge has been pitching his uranium ideas as “Obama’s Secret Pipeline” for at least a couple weeks now, and uranium in general is on the minds of pretty much all resource investors — it’s one of the few areas where there seems to be a pretty clear supply crunch and demand spike coming, so although it’s a troubling market to invest in because it’s highly regulated and political as well as economic, and, frankly, because most mining companies are junk… it’s really too tempting to ignore completely.
The cabal of newsletter writers and pundits who crow about commodities, including Kent Moors, the Agora/Stansberry folks, Rick Rule and Eric Sprott, and Doug Casey’s crew (though Stansberry just bought Doug Casey’s newsletter business recently), have all been touting uranium over the last two years as the one real breakout opportunity in the commodity markets — but it does clearly take some patience and a strong stomach as global spot prices (and actual contract prices, since most uranium is sold on long-term supply contracts to utilities) tend to react pretty slowly to changing dynamics… and, well, most uranium deposits that get discovered don’t actually get mined, and most mines take a decade or more to delineate and permit and develop — with big delays beyond that if the economics of the business get squashed for a while along the way.
Marin Katusa runs a hedge fund that has some Doug Casey/Rick Rule money in it, and he used to work for Casey on a newsletter or two and has now gone off on his own (he didn’t join Stansberry when the business changed hands) and is writing a free blog as he builds up his name recognition for his next hedge fund. He’s been talking up uranium for at least a couple years, and he had a good, thoughtful piece about uranium on his new website a couple weeks ago that you can check out if you want more of that core argument. The basic spiel about rising demand from China and India and from restarted reactors in Japan, and reduced or possibly curtailed supply from lack of investment in mines and from Russia (both because of political issues and sanctions, and because Russia’s big “megatons to megawatts” program of downgrading weapons-grade uranium and selling it to US utilities ended a couple years ago), is similar to most of the other uranium arguments you’ll see, but his piece is pretty thorough and is well-reasoned and data-supported.
The spot price of uranium is now back down around $35 after having bounced briefly up to the mid-$40s in the Fall (and falling to the $20s last Summer), and that gets watched pretty closely by individual speculators and clearly impacts the prices of uranium stocks — but really, uranium isn’t traded much on the spot market, no one is mining uranium “on spec” to sell to the highest bidder, they’re making deals before they build mines, and selling most of their production on long-term contracts, so we can think of the spot market as just one indicator of the sentiment about uranium prices. There’s a good piece here on the different prices from the World Nuclear Association, if you want a more thorough look at the market.
So does the fact that spot prices have come back down a little bit recently mean we can make gobs of money by buying uranium stocks cheap? Are the junior uranium names going to have another ridiculous bull run, like they have a couple times in the last decade or so?
Well, with that wordy intro let’s move on to the Nick Hodge tease about uranium — yes, we finally got there!
Here’s a bit from the ad:
“Obama’s Secret Pipeline
“The REAL reason why he’s rejected the Keystone XL Pipeline
“And why this $3.4 trillion move could ignite a $1 stock…
“Turning every $1,000 invested into $1,304,000 in 2015….
“Starting June 30”
“You see, while $3.4 trillion is flowing to these pipelines worldwide…
“And while the price tag for just one could reach $8 billion…
“It’s NOT in the construction or operations where everyday investors can get rich.
“It’s in the unusual type of fuel, the companies that produce it, and a crisis brewing right now that could send these little-known plays shooting to the heavens….
“Worldwide, it’s quickly becoming the #1 source of power for over 2 billion people.
“For the first time ever, over 76 countries are adopting it to meet their growing energy demand.
“In fact, in order to meet the growing need for electricity worldwide, use of this fuel has to grow by 136%!”
OK, so that’s all about nuclear power and uranium… and all the stuff about “secret pipelines” is just references to nuclear power plants — which, I would agree, are a key part of our global energy future, and the only way to really replace a lot of the coal-fired power plants that we clearly want to minimize in order to help clean the air. Alternative energy is wonderful, and solar has come down dramatically in price, but nothing can hold a candle to nuclear power when it comes to huge baseload power supplies that can replace fossil fuels without emissions.
And the market has recovered somewhat from Fukushima, which set nuclear power back probably a decade because it spurred Germany to shut down their plants — new plants are under construction in China, particularly, but also in India and around the world, and the Japanese are starting to talk more about returning their stronger and better plants to servce… and they will all require uranium.
And you know what? They almost don’t care how much it costs. Nuclear energy is one of the few sources of energy where the fuel cost doesn’t really matter to the energy producers, because the uranium cost is such a small part of the investment in nuclear energy — if coal prices go up, production shifts to natural gas plants… but if uranium prices go up, nuclear plants don’t change their behavior at all. They don’t consume less fuel just because prices fluctuate, because once you’ve sunk a billion dollars into building a power plant, the cost of the uranium for each refueling operation is almost irrelevant. Nuclear power is expensive because the plants are expensive to build and operate, not because uranium is expensive (uranium, including handling and disposal costs which are at least half the material cost, is probably no more than 25% of the cost of energy production at a typical nuclear plant — versus 80-90% at a coal or gas power plant).
So which little miners does Nick Hodge think are poised to profit from the “third wave” bull market in uranium, starting on June 30, when he says Japan will get attention for restarting more of their reactors (some of their reactors should indeed be back online this summer, you can see updates here)? Here are the clues:
“The $1 Stock Jumping 10,000% in 2015
“It’s a $1 stock.
“And it’s currently sitting on the most valuable uranium deposit in history… the last source of untapped high-grade uranium in the world.
“It’s located in Canada’s Athabasca Basin, the site of the world’s most valuable uranium mines.
“And this field is the crown jewel of the region.
“A recent resource estimate confirms it holds 105 million pounds of high-grade uranium.”
“Even at the current ultra-low uranium price — $35 per pound — that’s a $3.6 billion asset….
“… this stock has a very tiny market cap… just $428 million.”
This one is Fission Uranium (FCU in Toronto, FCUUF on the pink sheets) — it does indeed have a “maiden resource estimate” of 105 million pounds at their Triple-R deposit in Athabasca, announced just a few months ago, though “resources” are quite different from “reserves” (I think of it as resources being “how much are we pretty sure is there” and reserves being “how much we’re quite certain we can produce economically at the current price”).
This is the key area of North American uranium production — near Cameco’s huge mines, where hugely rich concentrations of uranium that are the envy of the world make it probably a bit dangerous but oh-so-efficient to do hard rock uranium mining. And Fission does certainly have a big discovery — I don’t know whether they’ll end up trying to mine it, or will get bought by a big producer, but if uranium interest heats up Fission is a natural place where some of that investor enthusiasm might be targeted — I’ll buy a few shares and put them in my back pocket.
Here’s more from Hodge on why he’s so frantic about this particular one:
“But here’s why this is REALLY a perfect storm of profit…
“The company’s PEA is expected for release sometime in July, right as the uranium price is soaring.
“The markets will already be piling into these stocks.
“And believe me, when they do, even weak uranium miners will skyrocket.
“So an incredible company like this — one with an unprecedented asset… releasing its PEA report right as the uranium market begins soaring in July and right as dozens of big uranium producers are entering into a fierce bidding war…
“Well, it’s about as close to guaranteed as anything I’ve ever seen in all my years in the markets.”
So, that’s probably more enthusiasm than you can handle for one stock — they are indeed planning to have a preliminary economic assessment (PEA) of their project released sometime this Summer, according to their most recent investor presentation, and whether or not uranium is actually soaring by June or July, well, I guess we’ll find that out when we get there.
How about the other stocks he hinted at? Your clues:
“Third Supercycle Play #2: My next pick is a spin-off of the first company I mentioned and could hand investors the same profits, if not more. You see, this play mimics the performance of its parent company. For instance, when my first pick recently jumped by 20%, this one soared by 50%… in just two weeks. Only thing is, it trades for just 1/10th the price — which means you only need a very tiny stake to see the windfall of your life. I expect it to double, even triple the gains of my first pick. So 20,000% gains or more is not out of question. That’s enough to turn a $500 investment into a million-dollar retirement nest egg. Similar plays like it have done just as well. Better, in fact.”
This one’s Fission 3.0, the spinoff from Fission Uranium — ticker is FUU on the Venture exchange in Canada, FISOF OTC in the US. Teensy, teensy stock, market cap around C$20 million, this is the owner of all the very early stage developmental properties that Fission Uranium didn’t want to be distracted by as they develop their Patterson Lake South project. Their properties are also all near or in the Athabasca Basin, and the most immediately promising ones (as I interpret it) are the ones directly north and south of Fission Uranium’s project — you can see their properties on the map on their website.
This is wildly speculative, depending not just on a recovery of the uranium market and of “animal spirits” for junior miners in the sector, but also on them actually discovering meaningful, commercially viable deposits. So, what the heck, I’ll buy a slightly smaller position in this teensy weensy one.
This is what happens when I go for too long without hitting the Blackjack tables, but don’t worry — all together these little uranium speculations I’m putting on are substantially less than 1% of my portfolio. This is speculating, not investing — if I get more convinced in the value of some of these stocks later on I may add to my holdings, but for now I’m just dickering around with something that has a seemingly appealing trend and shouldn’t be terribly correlated with economic growth, or a richly valued stock market, or the strength of the dollar, or whether Janet Yellen parts her hair on the left or the right.
How about a little more?
“Third Supercycle Play #3: This third pick may be the one I’m most excited about. Legendary investors Rick Rule and Doug Casey own a 16% stake in this company. And Marin Katusa, one of the world’s leading energy experts, calls it a “screaming buy.” You see, the CEO and founder of this company has a proven track record of making shareholders very rich, very quickly. He previously brought to market the major uranium miner UEC Corp. And during the second supercycle, UEC returned incredible gains. First it jumped 583% in just four months. Then it took off for 3,426% gains. Now, he’s brought to market a play just like it with similar profit potential. What’s more, it’s highly likely that its one high-grade uranium project, located on the uranium-rich Athabasca Basin, will become a spin-off company. This move will hand investors a fortune. And analysts project this to happen within the next six months, right as uranium is heating up. The combination of these two developments, plus its high-grade quality project, could send this $0.60 stock soaring by over 10,000% in 2015.”
Huh. Well, I was kind of expecting them to tease UEC, which gets touted quite frequently as a uranium stock, and for probably good reason — as an in-situ recovery company their grades are not nearly as high as the Athabasca mines, but they can produce uranium probably much more quickly if prices pick up — and the CEO, Amir Adnani, used to be somewhat of a stock promoter in Vancouver and is very investor-savvy, he’s trying hard not to spend any money on developing projects until prices rise, but UEC also probably has more “shovel ready” projects that could be started quickly than most. UEC is one of the more genuinely “levered to uranium prices” stocks, and has more or less doubled since Kent Moors started pitching it using these same big picture uranium trends about a year ago.
But apparently Hodge is not touting UEC, which means he’s touting Adnani’s other company, Brazil Resources (BRI in Canda, BRIZF OTC in the US), which is a roll-up of junior gold exploration properties in Brazil but (almost accidentally) ended up owning a uranium exploration property in the Athabasca basin as a result of one of their acquisitions. You can see their description of the uranium property, called REA, here on their website. It does make sense that this might be spun out at some point, particularly if we get a speculative craziness trend in the uranium stock market, but I don’t know if it will happen anytime soon — and that’s an extremely early stage exploration project, despite the fact that Areva is doing some drilling nearby and it’s only 50 miles or so from Patterson Lake South (Fission’s big discovery).
And yes, I own some warrants on Brazil Resources — the warrants started trading about a year ago, and they let holders buy Brazil Resources shares for 75 cents anytime before December 31, 2018, so they seemed to me to be an appealing low-cost way to get some leverage to gold for several years without putting a lot of capital to work, since Brazil Resources is pretty focused on not spending money or diluting shareholders… they’re just really waiting around, doing some exploratory drilling without spending too much, and hoping prices will get up high enough that miners want to partner with them to actually develop mines on their discoveries. Brazil Resources is a speculative company, very dependent on gold prices with that possible kicker from uranium, and the warrants are obviously more speculative still. Ticker for the warrants is BRI.WT in Canada, or BZRSF OTC in the US. I wouldn’t suggest these to anyone else, but I do happen to own some.
“Third Supercycle Play #4: My final pick is now the #1 developer of one of the world’s largest, most prospective uranium projects in the world. A recent acquisition has placed it in control of a whopping 100 million pounds of uranium — a multi-billion-dollar asset. It’s the kind of asset that would send this play through the roof on a massive uranium price upswing. During the last uranium supercycle, this company soared for incredible 11,700% gains. Right now, it’s trading dirt-cheap at just $0.04. And with this new billion-dollar asset, it could even beat that performance this time around.”
I can’t tell you much about this one, the only teensy tiny one that came close to making sense to me when I was browsing through the junior candidates was Anfield Resources (ARY in Canada, ANLDF OTC in the US), but that’s not a four-cent stock and hasn’t ever been, it’s more like 12 cents. Could also be Skyharbour Resources (SYH in Canada), Makena Resources (MKN in Canada), Azincourt Uranium (AAZ in Canada) or Athabasca Nuclear (ASC in Canada), all of these are absurdly small “shouldn’t be publicly traded” companies, with market caps well under $5 million, and I can’t bring myself to be quite that ridiculous. Perhaps it’s another one that I don’t remember or haven’t run across, or a company looking to develop a project outside of North America, there are a bunch of teensy weensy uranium juniors keeping their fingers crossed for a blowout bull market that will get someone to buy them at a premium — if you’ve got a favorite that I haven’t mentioned, feel free to let us know.
For now, I’ll be satisfied with my (very) small speculation on Fission and its daughter, Fission 3.0, and with my Brazil Resources Warrants, and I’ll be pretty sure that if uranium goes hyperbolic again, I’ll make some money… and if there’s another nuclear disaster or people cancel their reactor projects or Russia floods the market and the uranium price collapses, my portfolio can’t go down by more than 1% as a result and I’ll have gotten a little bit of my speculating urge out of my system. We’ll see how it goes.
—back to August now—
Well, as you probably noticed — Fission has not yet released their PEA… and, more importantly, since this ad first started running they decided to merge with Denison Mines (DNN) to create a fairly large uranium company, though the market showed no fondness for the deal and the price of both companies (it’s roughly a 50/50 merger, almost all stock) has drifted steadily down. As have all the others, really… I still own all of my speculative positions noted above, and also have a small call option position on Uranium Energy Corp (UEC), which was taken down by a short attack a month or so ago, helping drive the shares down from $2.50 or so to $1.
And yes, Japan has restarted a reactor, just a couple weeks ago — that news was overshadowed somewhat, at least for investors, by the tumult in their giant neighbor, China, this summer… and uranium prices have so far not been impacted in any significant way, spot prices are still in the mid-$30s.
I didn’t look any further into what “Play #4” might be, but the Irregulars had some additional suggestions when I posted this in May — including Lakeland Resources (LK.V, LRESF), Peninsula Energy (PEN.AX, PENMF), Macusani Yellowcake (MCYWF), Bannerman Resources (BAN.TO, BNNLF) or Canalaska Uranium (CVV.V, CVVUF)… don’t know any of those, but if you’re interested in sifting through uranium pennies there are a few more to add to your pile.
So… any thoughts on uranium from the Gumshoe faithful? Predictions? Favorites? Let us know with a comment below.