There are not many options when it comes to investing in uranium stocks but Timeless Funds has built a vehicle that acts as a diversified portfolio of everything uranium.
The future of uranium is looking very bright with 66 reactors under construction globally, particularly in China, India and the U.A.E. Saudi Arabia has signed agreements to build 16 reactors by 2032. So the demand for uranium will keep rising.
As more time passes the negative sentiment about nuclear energy generated by the Fukushima disaster is slowly changing. The alternatives to nuclear power, coal and oil, are both heavy carbon emitters and polluters and so there is growing environmental pressure to switch to nuclear power.
Fears over Japan dumping a lot of uranium on the market due to the shut down of their nuclear power plants have receded as they put reactors back into operation.
Before Fukishima the company Cameco Uranium had its stock rise by significantly between 2000 to 2008 then it adjusted down by 70% then rose again by 160% until Fukishima happened. Other uranium mining stock are capable of multi-bagger rises as well.
Palisade Radio Host, Collin Kettell: Welcome back to another episode of Palisade Radio. This is your host, Collin Kettell. On the line with us today is a new guest to the program. His name is Peter Zihlmann and he is a Fund Manager at Timeless Funds based out of Malta. Peter, welcome to the program.
Director, Timeless Asset Management Ltd., Peter Zihlmann: Thank you.
CK: You know we have done a lot of interviews based around uranium lately and for any of our listeners that have heard too much of it I apologize, but there is just a huge demand every time we talk about uranium. That is despite the fact that there is very small, very select amount of uranium companies to invest in. Now, Peter, you manage a few funds, but the one that maybe you are most interested in at this point in time is the Timeless Uranium Fund. Tell us a little bit about the uranium fund to start out.
PZ: Yeah, it is correct. We focus on the uranium fund because we like the story very much. As you said before there are not too many possibilities to invest in uranium stocks. There are maybe about twenty we consider and which we have in the portfolio. We have spread our investments by the segment. We have big caps like Cameco. We also have stocks that invest directly in physical uranium. We have a few producers the well known name. We have also some of the senior explorer companies like NexGen and Fission and then also some smaller companies. Actually we have the whole spectrum of the uranium space.
CK: Essentially, you have built a very nice proxy for investors who are interested in uranium to come in and get wide exposure to the space even though it is a narrow space.
PZ: Absolutely. Somebody has production, development and exploration, and he has a little bit of everything.
CK: Why do we not talk about why uranium is so exciting to you at the time? A lot of our listeners have probably heard the case for the demand in uranium, the rising demand. Tell us a little bit about why uranium interests you so much.
PZ: Well, the fact is that the world is building new reactors. I mean presently we have sixty-six reactors under construction: twenty-four in China, eight in Russia, six in India and South Korea, etc. We had just also learned that China has made an agreement, for example, with Saudi Arabia, and Saudi Arabia plans to have sixteen reactors operational in 2032. For example, if you take just China as a driving force. China today has more or less twenty-five reactors operational. But they expect to have ten times that number in about fifteen years so that demand is growing everywhere in the world.
The other side is that obviously we need a clean energy and nuclear is clean. We know very well that a lot of people actually die from bad air and pollution, etc. Nuclear power is the future and that is why we like it so much because the demand for uranium keeps growing.
CK: It seems that the fundamentals for uranium are all there. But to be fair they were all there a year ago and two years ago. Of course we had the Fukushima disaster which really put a damper on the industry. But in terms of timing do you have any sense of when things are going to turn around?
PZ: Well, it is difficult to forecast because as you say people have been very bullish for two years now and uranium price does not seem to go nowhere. Fukushima, obviously, had a huge impact and that is still in the minds of people. But I think it will change. It can change anytime. It can change tomorrow. It can change today. I think the fact is that people one day will wake up and just see the price go up. The other side is obviously the supply which at today's prices remains limited because traditional mining needs a much higher uranium price so that the supply will also be limited.
The gap between demand and supply can only go wider and the price has to go up. But it is extremely hard to tell when it will really happen. It should have happened long ago, but the markets are markets. It seems also that more and more people talk about uranium and the fact is as, I said before, the whole world is constructing new reactors with the lead of China, Russia, and India.
CK: Peter, uranium is a very unique commodity in that in terms of getting a new mining construction usually have somewhere between a 7 to 10 or 11-year timeline and that is due to the permitting associated, especially permitting of a mill, and at the same time the price of uranium during seven to ten years of a shortage can go up. We have seen it happen back 2001 to 2007 where uranium rose from $7 or $8 to $140 dollars. If that happened with oil or coal it would change in interest in using that source of fuel. But with uranium the fuel cost associated in nuclear reactor is not that important. Can you touch on that a bit?
PZ: Well, it is minimal in a nuclear reactor. I mean nuclear reactor costs $7 billion and running it is very cheap. I think the most important thing is actually on the other side - the correction of pollution. If you continue burning oil and coal you have a lot of pollution. With a nuclear reactor you do not have that, especially China has a big problem of pollution and for them it is the only way forward. The cost of uranium is not really a factor for them. Or let us take the example of Japan. Japan had to import all the oil. That is why they set on a nuclear power until Fukushima happened. But now they are going back because there is no alternative.
CK: I am happy you brought up Japan because that was going to be my next question. Obviously, Japan shutting down their reactors set off a bit of a chain reaction. Germany followed suit at least for a short period after Fukushima. Japan has now restarted two of their reactors and then two more. But reports were that two of those were shut back down and getting all these reactors online has been a slow process and it may continue to be a slow process. How important is Japan in the big scheme of things in terms of the price of uranium?
PZ: Well, it is certainly very important. In the first place when they shut down all their reactors there was a lot of fear that all the uranium they had would come to the market. Now that they are actually restarting their reactors, that will not be the case or very unlikely. I would say within two or three years at least half of the reactors in Japan will be online again. I think the Japanese factor or the fear from Japan will evaporate.
CK: What would you say at this point, Peter, are the most important countries or aspects of the uranium price moving up? I guess China is the biggest of all at this point.
PZ: Yeah, actually, presently, China has twenty-four nuclear reactors under construction. Russia has eight. India has six. The next one is the United Arab Emirates with four, the United States of America with five, and then Korea with three, etc., so a total of sixty-six reactors are under construction, and many, many more are planned. In this list we do not even have Saudi Arabia which has signed a contract with the Chinese to build sixteen reactors by 2032.
The other thing is also that a lot of countries even like Switzerland that has more or less decided to get out of nuclear energy, they are really re-thinking what they decided some years ago and what they do actually thus the five reactors which Switzerland has. The capacity is actually being increased by about 13% and so do other countries. Even the existing reactors to them more capacity is added. I mean the demand picture is so clear that in my opinion it is just a matter of time until the uranium price goes up. With the uranium price, obviously, the companies that produce or explore will go up much more. We have seen some wonderful examples of an exploration company like NexGen, which is in our portfolio, which has gone up more than 200% in two years. I think the potential is just enormous.
CK: Well, something we touched on at the beginning of the interview a bit and this is much more art than science in terms of looking back and seeing what has happened in the past. When uranium price does indeed start to move whether it is this year or in three years what kind of action do you anticipate in the stocks, and a lot of that is going to be a factor of just how few vehicles there are for so many investors rushing into the space to purchase?
PZ: Well, you see if you simply look at, let us say, the most conservative uranium stock, the biggest one, Cameco (NYSE:CCJ); if you look at the chart going back twenty years from 2000 to 2008, their stock went up 2000% and then we had the correction. It came down about 70%. Then we had another rise of the stock price of 160% until Fukushima happened. If you look back we had several corrections in the past twenty years. One was 79%. One was 71%. Now we are down 60%.
On the other side you see the potential these stocks had in the past when the uranium price started rising from 1992 to '96. The price of Cameco went up almost 500%, as I said before, until 2008. After the correction it went up 2000%. Until Fukushima happened, it went up 160%. This is the potential for the very conservative ones. But the other ones, the smaller ones, can easily go up five times or ten times as they did in the past.
CK: Yeah, it is truly an epic move in the uranium space when these stocks do go, and it feels like ages ago the last time we had a significant move. But that will certainly come again or at least I believe so and you believe so. I want to point all of our listeners to your website for more information. The website is www.timeless-funds.com. Peter, anything else to add for our listeners at this point?
PZ: Well, you see we are very hot about uranium, but obviously we also like a lot of precious metals. In an interview I recently heard somebody asked a guy what do you prefer uranium or gold? He said, "You know I have three children. It is like asking me whom do you prefer?" So I would say uranium is very hot, but gold and precious metals are also very hot.
CK: Yeah, well thanks for that analogy. It makes a lot of sense. We might see many of these commodities move in tandem if we get a bull market here. It should be exciting times for all of your funds, Peter.
PZ: Yeah, I hope so.
CK: Peter, thank you so much for coming on the show. It has been a pleasure.
PZ: My pleasure. Thank you.
Mr. Peter Zihlmann serves as Chief Executive Officer at Central Asian Minerals and Resources PLC. Mr. Zihlmann served as an Executive of Teryl Resources Corp. Mr. Zihlmann served as Executive at Linux Gold Corp. He has over 30 years' experience as an Investment Manager in Switzerland and abroad, including as Head of the Portfolio Management Department at Commerzbank (Switzerland) Ltd and Head of the Zurich branch of Banque Scandinave en Suisse. In 1994 Mr. Zihlmann established his own investment company, P. Zihlmann Investment Management AG. He serves as a Director of The Timeless Precious Metal Fund ("Timeless"), The Timeless Energy Fund and The Sierra Madre Gold & Silver Venture Capital Fund. He has been a Director of Central Asian Minerals and Resources PLC since July 1, 2013. Mr. Peter Zihlmann served as a Non-executive Director of Central Asian Minerals and Resources PLC from May 3, 2011 to July 1, 2012. He is a member of the Swiss Association of Asset Managers.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.