In this market commentary, David Belle examines the puzzling divergence between a rally in uranium spot prices and the sharp decline of uranium‑related equities, such as the Sprott Uranium Miners ETF. He attributes the equity weakness to the long‑duration nature of nuclear power projects: building a plant can take a decade or more, making cash‑flow streams highly sensitive to changes in interest rates. When yields rise, discounted cash‑flow models assign lower present values to those distant cash flows, straining miners’ balance sheets and depressing stock prices despite higher uranium prices. Belle contrasts this with shorter‑duration opportunities like small modular reactors (SMRs), which reach profitability faster and are less yield‑sensitive. He concludes that if macro yields begin to fall, uranium miners could become attractive long positions, especially outside the SMR niche.
Chapters
Uranium-related equities are getting smashed to bits. This is while the spot price of uranium is actually rallying. But the key thing is why. I want to explain something to people this morning with regards to uranium. Now here on the left, we've got the Sprott Uranium Miners ETF, and on the right, we've got uranium futures. Now uranium futures are relatively thinly traded, and so I put it onto a line chart to to show the price movements a little bit better. But what you'll notice is that uranium-related equities are getting smashed to bits, absolutely smashed. And this is while the spot price of uranium, which you can see here, is actually much, much higher. I guess it's actually rallying, it's going higher. You can see that. Don't need to be a genius to see that. But the key thing is why most people would say, oh, uranium's up, it means demand's up. Why is it that all of the uranium-related equities getting smashed to pieces. And it's really simple. Just like the long end of the yield curve, any movement in interest rates is going to substantially affect the price of that bond. And this is what uranium and the whole uranium play is. It's very, very long duration. Even to get a nuclear power plant online, it's going to take 10 years, maybe. In the UK's case, maybe 1,000 years. But this is exactly what we are looking at. And so if If you were to look at a standard discounted cash flow model, what you are effectively doing is that when interest rates are increasing, those cash flows become worth less, I guess, just purely due to the duration of the theme, the amount of time it's going to take for them to reach profitability. That added cost effectively in terms of interest creates more strain on balance sheets. It makes the stocks less attractive even though the uranium price is increasing due to And so it's really important just to focus on, okay, what is the length of time to profit? I think with a lot of stocks, the space angle might be very similar as well. And the reason SpaceX isn't necessarily getting hit so much is because it's not primarily a space-based company, right? 15% of revenues are derived from SpaceX in the actual SpaceX ticker, which is super interesting, but it's all to do with long duration. So In my view, if you actually want a super interesting play on yields coming back down, probably good to be long uranium miners and any equities related to uranium, potentially outside of that small modular reactor play, because that is a shorter time to profit. And so it's not going to be as sensitive to interest rates perhaps. But that's the way that I'm looking at this. And so I will be playing this once I get a true kind of sign that the macro regime is shifting to lower yields again, which I think there are signs of, definitely signs of, I think uranium miners is the place to be.
