🥔 Uranium: Fueling the Energy Comeback
The Uranium Convexity Trade
🧭 Executive Summary
We believe uranium is in the early stages of a multiyear structural bull market, driven by:
A global nuclear resurgence
Tightness across the entire fuel cycle
Government-led investment and policy tailwinds
A supply response that remains slow and highly concentrated
Utilities are locking in long-term contracts. Governments are stockpiling. And enrichment capacity - especially in the West - remains deeply inadequate.
This is one of the most asymmetric energy setups on the planet.
🌍 Macro Context: The Policy Flywheel
The U.S. Department of Energy (DOE) is directly funding enrichment and contracting domestic uranium supply through multibillion-dollar DPA and IRA programs.
The ban on Russian uranium imports is now law - with no waivers permitted after 2027.
SMRs are in motion: DOE reopened a $900M funding program for reactor builds and supply chain development.
International allies (UK, Canada, France, Japan) have formed the Sapporo Five, pledging >$4B toward enrichment and SMR deployment.
Utility contracting is accelerating, while spot market activity remains thin - a sign of rising off-market strategic demand.
This is no longer a speculative trade. It’s a national security realignment.
⚛️ Fuel Cycle Breakdown: Tight All the Way Down
Demand:
60+ nuclear reactors under construction globally
U.S. SMR pilot projects receiving DOE subsidies
Life extensions approved across U.S., Canada, France, and South Korea
Supply:
Only a few producers dominate: Cameco, Kazatomprom, and select juniors
Enrichment capacity is maxed out - especially with Russia off the table
Conversion bottlenecks are just as severe as raw uranium shortages
🔎 Critical Fact:
The DOE has confirmed Russia still supplies ~44% of global enrichment. With U.S. imports banned post-2027, that capacity must be rebuilt domestically.
📈 Catalysts
✅ U.S. ban on Russian uranium fully passed - no waivers allowed after 2027
✅ Centrus, Urenco, and Orano now funded by DOE to ramp domestic enrichment
✅ DOE $900M SMR pilot program reopened in April 2025 - selecting new sites
✅ NRC SMR licensing: NuScale approved, X-energy in active review
✅ ETF flows rebounding: URNM gaining capital, even as Sprott Physical sees volatility
✅ Spot uranium rebounding: ~$71–75/lb (U3O8), while term prices continue rising
⚠️ Risks
Reversal in nuclear sentiment or policy shifts in OECD markets
SMR buildout delays or permitting friction
Speculative junior dilution / execution risk
Volatility from macro flows (rates, liquidity) affecting short-term ETF demand
📦 Positioning Framework
🔋 Core Exposure
Cameco (CCJ) – Tier 1 production + conversion optionality
URA / URNM – Diversified equity baskets (exploration to production)
SRUUF – Sprott Physical Uranium Trust (spot exposure)
Juniors – NXE, DNN, UEC, DML.TO - leverage to contracting cycle
⚙️ Options-Based Structures
LEAPS on URNM or CCJ (Jan 2027+)
Call spreads or synthetics to express long convexity with risk controls
LEAPS + overwriting to enhance yield and reduce carry cost
📐 Capital Efficiency Matters
Not all uranium exposure is created equal.
Cameco offers rare capital discipline: long-life Tier 1 assets, integrated conversion, and clean FCF yield. At ~$75/lb spot uranium, ROIC already exceeds WACC - and term prices suggest more to come.
Juniors, on the other hand, often burn cash. But a few offer genuine leverage to pricing and contracting cycles - if positioned carefully.
This is a classic Potato Capital setup: core capital-efficient exposure + risk-sized convex optionality.
📊 Scenario Framework
The distribution here is intentionally convex.
The bull case isn’t the most likely outcome - but it is plausible, underpriced, and highly impactful. That’s where structural asymmetry lives.
The base case reflects gradual but durable tailwinds: government contracting, policy insulation, and term price normalization.
The bear case is cushioned by strategic stockpiles and long-term demand - so the downside isn’t zero, but it's tolerable.
With an expected return of ~66%, we believe this is a uniquely structured trade where the market is still mispricing the range of credible outcomes.
This is exactly the kind of thesis we look for:
Macro-aware: Government policy, supply chains, and geopolitics are driving outcomes
Capital-efficient: Tier 1 producers can convert higher prices into FCF with minimal capex
Convex: The upside is nonlinear - while the downside is cushioned by term demand and policy anchors
Under Owned: Institutional flows are building, but broad portfolios remain underexposed
We’re not chasing momentum. We’re modeling asymmetry - and positioning where others aren’t looking.