Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: Hello and welcome to another episode of the Odd Lots Podcast.
Speaker 3: I'm Jill Wisenthal and I'm Tracy Alloway.
Speaker 2: Tracy, are we calling it a nuclear revival yet?
Speaker 1: No?
Speaker 2: I mean for real, like, is that a thing?
Speaker 3: You know, what's going to happen? As soon as you
Speaker 3: start calling it that, it's gonna like peter out, Ugh, fizzle.
Speaker 2: Don't say that. Don't say that. Some people would say,
Speaker 2: we saw the recent three Mile Island news, We've seen
Speaker 2: some other things of that nature. Some people would say that,
Speaker 2: at least in the US, there's something of a nuclear
Speaker 2: revival going on.
Speaker 3: Yes, you know what I find kind of funny is
Speaker 3: if you look at one of the price impacts of
Speaker 3: a nuclear revival, it's uranium. Yeah, but uranium started to
Speaker 3: go up, I think right after the pandemic, and now
Speaker 3: it's come down a little bit from its heights, its
Speaker 3: recent heights. So it's kind of funny, like it's sort
Speaker 3: of acting like a meme stalk.
Speaker 2: Yeah, there's literally what I was saying. I was gonna
Speaker 2: say that for a certain portion of the public, uranium
Speaker 2: is like bitcoin. There's certain assets out there that have
Speaker 2: these sort of cult like things where it's not just
Speaker 2: that people are bullish, but they think that like in
Speaker 2: the future, if they're smart and savvy enough to get
Speaker 2: in now, they're going to make this huge fortune. And
Speaker 2: I would put Crypto in there, and I would put
Speaker 2: the people who play those like stub Equity of Fanny
Speaker 2: and Freddy in that category. And then there's like the
Speaker 2: uranium cult on social media, who thinks like, we're gonna
Speaker 2: buy uranium and one day everyone will wake up and
Speaker 2: realize that nuclear is the future of energy, that all
Speaker 2: electricity will be powered by nuclear, and those of us
Speaker 2: who are smart to get into uranium now will be
Speaker 2: the new inheritors.
Speaker 4: Of the Earth.
Speaker 2: You know.
Speaker 3: The funniest thing I saw when this became a thing
Speaker 3: back in twenty twenty one. So there's a uranium market subreddit,
Speaker 3: of course there is, yeah, And someone posted on there
Speaker 3: that they're a broker for physical uranium. So if you're
Speaker 3: interested in buying physical uranium, you can buy it in
Speaker 3: like one hundred thousand pound increments. So I don't even
Speaker 3: know like who the target is for this, Who is
Speaker 3: the retail trader that is buying one hundred thousand pounds
Speaker 3: of uranium and presumably storing it somewhere.
Speaker 2: One day that person will have the mandate of heaven.
Speaker 2: But the question is when will that be. Even if
Speaker 2: there is a nuclear revival, even if all across the
Speaker 2: rich world they like nuclear is the way to go,
Speaker 2: what does that actually mean for the price of uranium.
Speaker 2: I'm not really clear.
Speaker 3: Yeah, me neither.
Speaker 2: Well, I'm really excited to say because we do have
Speaker 2: the perfect guest. We're going to be speaking to someone
Speaker 2: who knows everything about every commodity in the world, as
Speaker 2: far as I could tell, at least related to energy
Speaker 2: commodities and maybe metal commodities. Two, he's someone on the
Speaker 2: cell side, you know, Tracy, there are a few people
Speaker 2: on the cell side, not many. Many people on the
Speaker 2: cell side are worth reading. There are some people who's writing.
Speaker 2: I consider it to be a crime that they're locked
Speaker 2: up within cell side, because it's so good and so
Speaker 2: interesting that it just shouldn't be the type of thing
Speaker 2: that traders click on for five seconds. And we're going
Speaker 2: to be speaking to one of them.
Speaker 3: Yes, actually, this analyst. I think their research does get
Speaker 3: published in a book. Oh yeah, every once in a while.
Speaker 3: I have some of those some old ones and they
Speaker 3: stand the test of time, which is something that you
Speaker 3: can't say for all cell side research.
Speaker 2: No, you absolutely can't. So we are going to be
Speaker 2: speaking with the one and only Bob Brackett, literally the
Speaker 2: perfect guest. I've had him on the podcast before. He
Speaker 2: is the head of America's energy transition at Bernstein Research.
Speaker 2: But what's your deal, Because, like I.
Speaker 3: Said, you do a deal.
Speaker 2: You know, like when I read your report on uranium,
Speaker 2: you're going into the science of how it's mine. You're
Speaker 2: going into the science. You have a copy and paste
Speaker 2: of Einstein's letter to wrotell talk about how this uranium
Speaker 2: thing could be big for bombs and electricity and so forth.
Speaker 2: They don't really look like typical analyst reports.
Speaker 4: Yeah, so I think the challenges I'm a geologist living
Speaker 4: in Manhattan. There You've got a handful of jobs, and
Speaker 4: I think I've had two of the best. I was
Speaker 4: working with HAS Corporation for many years. I've been at
Speaker 4: Bernstein now more than a dozen and so the answer is,
Speaker 4: my whole lens of this planet is a cyclical commodity investor.
Speaker 4: And how do I think about cycles? And it's always
Speaker 4: depletion based, So anything that depletes naturally, other people run
Speaker 4: away from I tend to run towards, and uranium is
Speaker 4: right in that wheelhouse.
Speaker 3: Okay, I have a really basic question what is uranium?
Speaker 3: And also what is enriched uranium? Because when I hear that,
Speaker 3: I always think are we adding B vitamins to it
Speaker 3: or something? And then also what is yellow cake? And
Speaker 3: why does it look so delicious?
Speaker 4: Well, we'll start with yellow cake because that's where we
Speaker 4: start geologically. And the funny thing about uranium as a
Speaker 4: mind commodity is most it is drilled for, and most
Speaker 4: of it looks more like an oil and gas operation.
Speaker 4: So the majority of uranium yellow cake U three eight
Speaker 4: comes out of the ground through insituo leaching. Drill a well,
Speaker 4: pump fluids down to a sandstone reservoir, and pump up
Speaker 4: and treat the yellow cake. So yellow cake is U
Speaker 4: three eight. It's a uranium oxide. It looks nice and yellow.
Speaker 4: It is not terribly dangerous because it is mostly a
Speaker 4: very stable form of uranium. So uranium has isotopes if
Speaker 4: we go back and remember our nuclear chemistry, and so
Speaker 4: most of yellow cake is U two thirty eight. I
Speaker 4: send that to an enrichment facility I spin it up,
Speaker 4: I get rid of the oxygen and replace it with
Speaker 4: fluorine for chemical reasons, and then enrich it to power
Speaker 4: plant grade, and then I can keep enriching it to
Speaker 4: weapons grade. But hopefully we don't go that far.
Speaker 2: Hopefully the person buying one hundred thousand pounds on Reddit
Speaker 2: isn't doing it. Earlier, you know, you mentioned depletion is
Speaker 2: being this core lens for which you maybe view the
Speaker 2: entire world. And I remember the one time we talked
Speaker 2: to you before was very eye opening conversation because I
Speaker 2: think the thing I took away from it is and
Speaker 2: I think the way we from it disruption does not
Speaker 2: exist within commodities the same way we think of in
Speaker 2: tech and commodities. Almost they basically never disappear and they
Speaker 2: never go absolute. Maybe with the exception of whale blubber,
Speaker 2: which I don't think we use for lighting anymore, But
Speaker 2: by and large, this seems to be like a core
Speaker 2: gious of yours. I remember you wrote a great thing
Speaker 2: on the coexistence of I think it was synthetic rubber
Speaker 2: and regular rubber, but this idea like they just stay,
Speaker 2: They'll be with us here forever.
Speaker 4: Yeah, we were using whale based lubricants in the space age.
Speaker 2: There you go, we stopped.
Speaker 4: Okay, yes, but yeah, So the answer is if you're
Speaker 4: in the depletions based business, imagine COVID, where everybody on
Speaker 4: the planet started hoarding things because they worried that it
Speaker 4: was going away and it couldn't be replenished, and we
Speaker 4: did it again with the most recent couple hurricanes. If
Speaker 4: you're in the natural resource business, you wake up every
Speaker 4: day knowing your business is going out of business and
Speaker 4: think how crazy behaviors were in a hoarding sort of world.
Speaker 4: And that's the business model. And so in one, it
Speaker 4: creates this strong desire to go replace resource and if
Speaker 4: incentives are bad, that's kind of crazy. But two, it's
Speaker 4: this constant treadmill. If the industry stops, the market rebalances.
Speaker 3: So what does the supply of uranium look like right now?
Speaker 3: How much is out there and how accessible is it?
Speaker 4: So yeah, roughly there's about two hundred million pounds of
Speaker 4: uranium a year. And I do want to say that
Speaker 4: we didn't really talk about what we were going to discuss,
Speaker 4: and so I'm.
Speaker 5: Oh, yeah, sorry, So I'm coming in a little cold,
Speaker 5: but perfectly happy because uranium is something that's been in
Speaker 5: my head and it's had this a lot of client
Speaker 5: interest in the last year, and that sort of inflected.
Speaker 4: Up just in the last months.
Speaker 2: Okay, So we were reading your clients and you sense
Speaker 2: the book. Okay, okay.
Speaker 4: And so it is a small market. So it's two
Speaker 4: hundred million pounds, and when you ever hear a million,
Speaker 4: that sounds like a lot, but then you divide by
Speaker 4: two thousand pounds per ton, and it's one hundred thousand kilotons.
Speaker 4: And to put that into context, I'm going down next
Speaker 4: month to Escondida, the world's largest copper mine. It moves
Speaker 4: a million tons a year of just copper, and so
Speaker 4: you could fit ten of the entire uranium industry within
Speaker 4: a single copper mind. So it's a very small industry.
Speaker 4: It's an industry that sells to one customer a lot
Speaker 4: of commodity. Like copper goes into all parts of the economy,
Speaker 4: uranium goes into nuclear power. But it's very small, it's
Speaker 4: very regulated. And there's been this challenge between local ESG
Speaker 4: and global ESG and the energy transition, which is to say,
Speaker 4: I'm going to go into your remote community in South America,
Speaker 4: and say, for the good of mankind, we need one
Speaker 4: hundred thousand tons a year of copper so that we
Speaker 4: can electrify the economy and reduce emissions. In the middle
Speaker 4: of your backyard there's going to be a several thousand
Speaker 4: foot open pit mine, and that local community says, not
Speaker 4: a chance. I don't want that. That's hard enough to
Speaker 4: do with copper right now, Think about uranium. Think about
Speaker 4: trying to pitch a local community. This will be great
Speaker 4: for jobs, it'll be great for investment, it'll be great
Speaker 4: for tourism. We're gonna mine for uranium, and so as
Speaker 4: a result, the ability to rapidly bring on uranium is
Speaker 4: pretty challenging, which kind of suggests market tightness.
Speaker 3: Joe, I love that we didn't actually tell Bob that
Speaker 3: we're going to talk about uranium. But you've already given
Speaker 3: us so much interesting and knowledgeable stuff, so thank you
Speaker 3: for that.
Speaker 2: I realized sometime this morning that we actually had never
Speaker 2: told what we're going to be talking about. But I
Speaker 2: also knew just from reading Bob that it wouldn't be
Speaker 2: an issue at all, and that he would have to
Speaker 2: be totally comfortable and keep him on his toes a
Speaker 2: little bit Now I realize we're working in the audio
Speaker 2: medium of podcasts, and so this is going to be
Speaker 2: a little bit of a tricky question. But to the
Speaker 2: extent that you can, can you summarize essentially like you
Speaker 2: have a chart in your recent uranium note that I read,
Speaker 2: give us the sort of medium term history of the
Speaker 2: uranium price and why it went up and down over time.
Speaker 4: The most important thing about uranium when we think about
Speaker 4: commodity prices in general, I'm pretty good about picking the
Speaker 4: middle of the cycle. It's the marginal cost of commodity,
Speaker 4: and I can find the bottom of a cycle very well.
Speaker 4: Miners refuse to give metals away for free. So when
Speaker 4: the ebitdah of a marginal zinc mine or nickel mind
Speaker 4: goes to zero, that mind goes to care and maintenance
Speaker 4: and stops producing and price recovers from there. It's the
Speaker 4: top of the cycle where pricing is the hardest to
Speaker 4: figure out. But historically what happens for other commodity sector
Speaker 4: is it's demand destruction and or substitution. So those are
Speaker 4: the two things you look for. So when copper price
Speaker 4: flies up, then aluminum becomes substitutable. And if aluminum price
Speaker 4: doesn't move, well, I'll just use aluminum wiring in this
Speaker 4: transmission with uranium one that power plant. The cost of
Speaker 4: uranium into the power plant is a rounding error once
Speaker 4: I've spent the billions and something.
Speaker 2: This is really key because we talk all the time
Speaker 2: about the cost of nuclear and construction. Uranium itself basically
Speaker 2: never comes up.
Speaker 4: It's under one hundred bucks a pound, okay. And if
Speaker 4: you think about running a coal fired power plant, you
Speaker 4: are moving millions of tons of material into that plant
Speaker 4: every year. With uranium, it's thousands, right, So it's a
Speaker 4: remarkably dense, obviously source of fuel. And so once that
Speaker 4: plant is built, there is very little evidence that that
Speaker 4: plant ever shuts in on uranium price. And then you
Speaker 4: combine that with the structure of the industry. If it's
Speaker 4: a utility and it can pass price onto the rate base,
Speaker 4: well then it's not taking the full brunt to that
Speaker 4: price straight to the head. So we don't see substitution
Speaker 4: on fly ups for uranium. We don't really see demand destruction.
Speaker 4: And it's also one of these markets that is very
Speaker 4: difficult physically short or commercially short. And so those are
Speaker 4: the three Boogeyman's at the top of the cycle.
Speaker 3: They don't seem to be obvious who are the actual
Speaker 3: players in the uranium market because I remember, again, like
Speaker 3: going back to twenty twenty two, I think people were
Speaker 3: talking about the price going up because there was a
Speaker 3: new physical ETF that came out and was buying a
Speaker 3: lot of it. And to your point, it's a relatively
Speaker 3: small market, so presumably that kind of action could also
Speaker 3: push prices.
Speaker 4: Yeah, so two thoughts there. So there was this investment vehicles,
Speaker 4: there was a spot uranium physical trust that is. But
Speaker 4: I always go back to eight nine where the price
Speaker 4: of oil shoots to one hundred and forty bucks a barrel,
Speaker 4: and there were investigations from Congress and was it the speculators?
Speaker 4: Was it Wall Street that caused the price to skyrocket? So,
Speaker 4: and there was never a Purp walk, And I figure
Speaker 4: even if there was half an excuse for a Purp walk,
Speaker 4: they would have found somebody to walk out of a
Speaker 4: building somewhere in our neighborhood all those years years ago.
Speaker 4: And so in my head that I don't believe that
Speaker 4: the speculators can move for any sustained period of time
Speaker 4: in the commodity. Sometimes they can see the trend and
Speaker 4: get into it before it takes off. I think they
Speaker 4: just saw a fairly obvious trend. I should say. The
Speaker 4: fourth thing that can kill uranium prices, and it is
Speaker 4: the one out there that if you're kind of long
Speaker 4: uranium uranium stocks you have to be aware of are
Speaker 4: nuclear disasters or nuclear accidents. And so if we look historically, yeah,
Speaker 4: the price corrections down on uranium always came on the
Speaker 4: back of Fukushima, or they came on the back of
Speaker 4: Three Mile Island.
Speaker 2: So when were the big peaks in uranium prices? What
Speaker 2: was going on in the world. I mean, even setting aside,
Speaker 2: we know what caused them to go down, what was
Speaker 2: going on in the world at the time, and which
Speaker 2: years that there was a real uranium bull run.
Speaker 4: They just kind of drift up, and so in real
Speaker 4: terms they never get much above where we are now.
Speaker 4: So our price decks about one hundred bucks a pound,
Speaker 4: so you never see thousands or two hundreds of pound,
Speaker 4: and you just have a market that absorbs uranium regularly
Speaker 4: at a price that doesn't care and then recorrects on
Speaker 4: disasters where shut ins and fear of future plants causes
Speaker 4: the market to go and then you'll typically fall to
Speaker 4: twenty thirty forty pounds, which is the cash cost where
Speaker 4: somebody says, I'm just going to leave it in the ground.
Speaker 3: How is it actually stored? If I'm that redditor who's
Speaker 3: interested in buying one hundred pounds of physical or I'm sprought,
Speaker 3: what am I actually doing with this uranium?
Speaker 4: So once it's enriched, there are extremely strict guidelines on
Speaker 4: the types of organizations and the type of regulators that
Speaker 4: watch you store it. In theory, yellow cake is stored
Speaker 4: at mind mouths and can be stored in the supply chain,
Speaker 4: but enriched uranium is extremely heavily regulated. So companies like Camiico,
Speaker 4: for example, might have regulatory authority, but not Joe uranium
Speaker 4: wall Street on Reddit.
Speaker 2: What causes demand to change in the short term, So
Speaker 2: I imagine if the US was like, we're going to really
Speaker 2: go nuclear crazy and we're gonna and we'll get to
Speaker 2: all that about your prospect for nuclear but I imagine
Speaker 2: demand would go up. But in the course of a
Speaker 2: year twenty twenty four, where we see what's out there
Speaker 2: and we see the utilities and what they need, and
Speaker 2: we know there's not suddenly going to be a new
Speaker 2: nuclear plant tomorrow. What does the demand picture look like?
Speaker 4: So two ways to create uranium demand one and we've
Speaker 4: seen a bit of both. One is to build new
Speaker 4: power plants and the second is to turn the old
Speaker 4: ones back on. And so if you think about three
Speaker 4: Mile Island being reactivated to support and Microsoft, imagine the
Speaker 4: junior strategist that went to Microsoft's board and says, you
Speaker 4: know what, aipower demand is huge. We need a cheap, ratable, dispatchable,
Speaker 4: flat base load of power to supply it. We should
Speaker 4: invest in nuclear power. And I imagine somebody higher above
Speaker 4: that person said, are you an idiot? Have you ever
Speaker 4: heard of three Mile Island? And this junior strategy said, yeah,
Speaker 4: that's the one. We should turn that one back on.
Speaker 4: And the fact that it vetted through and it's not
Speaker 4: just Microsoft now every big tech company is associated with
Speaker 4: nuclear investment, and they have all gone through this process
Speaker 4: of what do they need based electricity of an unknowable
Speaker 4: demand growth and where can they get it? And so
Speaker 4: whether it's funding new SMRs, small modular reactors, or reactivating
Speaker 4: the existing ones, it's been a remarkable inflection point.
Speaker 2: And then when all these headlines come and suddenly everyone
Speaker 2: wakes up that all these tech companies are going to
Speaker 2: want some nuclear play. What's happening on the producer side,
Speaker 2: because I imagine they can't just turn a switch right
Speaker 2: away and have more what's happening on the supply side
Speaker 2: when these headlines hit.
Speaker 4: So on the producer side, the good news is again
Speaker 4: it's a smallish market and it'll move relatively slowly. So
Speaker 4: the real inflection would be around small modular reactors because
Speaker 4: reactivating closed reactors. You know, we've got one up the Hudson,
Speaker 4: you could reactivate theory.
Speaker 2: I guess I'm on the mining side.
Speaker 4: So on the mining side, I think the miners need
Speaker 4: a price signal, which they have, They need regulatory approval,
Speaker 4: and then they'll start to go out and reactivate some
Speaker 4: of these mines. They'll start in the US and Canada.
Speaker 4: Right the Canada already it's certainly the Athabasca region. There's
Speaker 4: plentiful uranium resource there, and there's a range of places
Speaker 4: in the US you can find uranium along the Gulf Texas.
Speaker 4: You can go find it out in kind of four
Speaker 4: corners out in the west. So the resources there you
Speaker 4: don't need huge amounts of capital, and we're starting to
Speaker 4: get a signal for a response, and then you go
Speaker 4: further remote on the cost further remote, I should say,
Speaker 4: not on the cost curve. Namibia's got a fantastic endowment. Russia,
Speaker 4: Kazakhstan have endowments, and that's where this supply is ultimately
Speaker 4: going to come from. From a security of supply, clearly
Speaker 4: the US and the Canadian stuff is closer to home.
Speaker 3: What's the time frame for this? Like, on average, how
Speaker 3: quickly can supply ramp up?
Speaker 4: Forever? In two years? So roughly we are measuring copper
Speaker 4: mine life cycles in a decade now, right from a
Speaker 4: maiden resource to first production. So even the easy stuff
Speaker 4: is really measured in half a decade to a decade.
Speaker 4: And so yeah, uranium, if it's quick, I'd be stunned.
Speaker 4: If there's a big supply response in less than five years,
Speaker 4: that seems hard to see. If five to ten you
Speaker 4: start to get a response, and again, because the volumes
Speaker 4: are small, we could start to balance the market them.
Speaker 3: So the price of uranium is obviously tied to the
Speaker 3: prospects of nuclear energy, but nuclear doesn't exist in a vacuum.
Speaker 3: When it comes to the energy transition, and there are
Speaker 3: other options out there, like solar or wind. How do
Speaker 3: you kind of evaluate the cost for nuclear versus wind
Speaker 3: and solar.
Speaker 4: And there's two end members. In reality, it always sits
Speaker 4: in between. So the primary end member that everyone talks
Speaker 4: about in the energy space is the levelized cost of energy.
Speaker 4: And Blizard, for example, has been studying this for decades
Speaker 4: and putting out great work. And the idea of levelized
Speaker 4: cost of energy is I need an electron, I need
Speaker 4: to charge my phone. I don't need to charge it
Speaker 4: all year. I just need to charge it now, and
Speaker 4: that would be levelized cost of energy, and wind and
Speaker 4: solar are remarkably good from that standpoint. Then there's the
Speaker 4: other end member, which is, hey, I need to power
Speaker 4: a remote Antarctic field station right something way off the grid,
Speaker 4: and I need it base load twenty four to seven
Speaker 4: for a year. And if I don't have baseload, if
Speaker 4: I have intermittency, if the sun shines doesn't shine, then
Speaker 4: I need batteries to support the rest of the time.
Speaker 4: And so if my sun shines one percent and I
Speaker 4: need the other ninety nine on batteries, I got to
Speaker 4: buy a lot of batteries.
Speaker 3: So ELCO wouldn't take that into account, right, so.
Speaker 4: ELCO wouldn't be a levelized full cycle or full system
Speaker 4: cost of energy. Adding adding letters to the acronym does,
Speaker 4: and then nuclear starts to shine because it is just
Speaker 4: it's built to be baseload.
Speaker 2: We've done episodes. We've done a lot of episodes on
Speaker 2: renewables and some on batteries and the intermittency issues that
Speaker 2: arise with renewables. We've done episodes on nuclear. And you know,
Speaker 2: there are people who think it's going to be an
Speaker 2: all Like I was at a conference last week, and
Speaker 2: a day at that conference, I was like, I'm convinced
Speaker 2: the future is all solar. And then I'll talk to
Speaker 2: someone else and like, the future is all nuclear. And
Speaker 2: my gut would be that the future is not going
Speaker 2: to be all of one energy source. But how would
Speaker 2: you go about thinking what will determine what that ultimate
Speaker 2: mix looks like? Imagine a fully electrified economy. What is
Speaker 2: it policy decisions, is it technological breakthroughs? What ultimately been
Speaker 2: your view will determine the share that will be nuclear
Speaker 2: vers solar versus maybe some wind.
Speaker 4: So I sort of dismiss these all or non hypotheses.
Speaker 4: Because of the world we live in, you can barely
Speaker 4: We don't have a single type of telephone, we don't
Speaker 4: have a single type of carbonated beverage, we don't have
Speaker 4: a single beer in the market, etc. So you kind
Speaker 4: of go down and there's no obvious reason why modern
Speaker 4: economy needs one form of electricity. So it's it's going
Speaker 4: to be a big balance, and the way to solve
Speaker 4: for intermittency, there's kind of three ways to do it,
Speaker 4: you know, One is nuclear create energy that's baseload on
Speaker 4: all the time. The other is batteries where I can
Speaker 4: sort of offset the intermittency. And the third is sophisticated grids.
Speaker 4: Right if my grid is big enough, Right, if I've
Speaker 4: got a cross European grid and it's windy and Norway,
Speaker 4: but I need my AC in Spain, the grid can
Speaker 4: solve it. And so there's this sort of competition between
Speaker 4: I mean, investing in the grid, which we're not doing
Speaker 4: enough of globally, investing in cigs.
Speaker 2: Just to be clear, when you think about what share
Speaker 2: of the electrified economy will be powered on nuclear, what
Speaker 2: things will go into that determination.
Speaker 4: So we expect that if it grows it's going to
Speaker 4: be less than ten percent, right, it's going to be
Speaker 4: it's not going to be a dominant form of energy
Speaker 4: simply because we would have to build so many reactors
Speaker 4: so quickly and so generally. The way we get at
Speaker 4: our long term view of what electricity demand from uranium
Speaker 4: is is you can take an iea net zero pathway,
Speaker 4: or you can take the sustainable pathway and it gets
Speaker 4: you something like gdp ish growth from a base of
Speaker 4: ten ish percent, and it's always going to be there.
Speaker 4: So it's always going to be part of the mix.
Speaker 4: What you're seeing is a customer base that really really
Speaker 4: wants it and has deep pockets. And so if you've
Speaker 4: got big tech throwing research and development funds, then you
Speaker 4: can start and say, well, well maybe it inflects high
Speaker 4: and maybe small modular reactors come quicker.
Speaker 2: And what's the higher is at fifteen?
Speaker 4: Yeah, it'd be that sort of tune. Right, It's never
Speaker 4: going to be there's no obvious reason it has to
Speaker 4: be the majority.
Speaker 3: So since we mentioned batteries and we're talking about uranium,
Speaker 3: I wanted to bring up a sort of another MEMI
Speaker 3: type thing, which is lithium. So if you look at
Speaker 3: a chart of the lithium price. I mean, it looks
Speaker 3: like a bubble, a bubble that burst. What's been going
Speaker 3: on there?
Speaker 4: So on this l side on Wall Street, they are
Speaker 4: perma bulls, and there's perma bears, and then I'm something
Speaker 4: of a perma cycle. And so my general response is
Speaker 4: this two shall pass. And so lithium prices were high
Speaker 4: two years ago, and I would have said, and we
Speaker 4: did say this two shall pass. They're low today, measured
Speaker 4: in ten bucks a kilogram, sorts of levels in this
Speaker 4: two shell pass, and we would say not returning to
Speaker 4: that eighty dollars a kilogram from the whipsaw effects of
Speaker 4: the post COVID and but really think about building back
Speaker 4: from ten to maybe fifteen dollars a kilogram in the
Speaker 4: near term towards twenty. It's not a terribly hard commodity
Speaker 4: to extract, it's not terribly scarce, and we've terribly over
Speaker 4: capitalized it for the next couple of years.
Speaker 2: I imagine that within lithium, and I'm just imagine, like
Speaker 2: I said, I'm just imagining that there is a lot
Speaker 2: booming demand from the electrification and the batteries and literally everything,
Speaker 2: and that is a bullish force, and that batteries are
Speaker 2: getting better and better and better and more efficient, and
Speaker 2: that that is a bearish force for lithium. Tell me, Ave,
Speaker 2: that's right. But more importantly, how do you think about
Speaker 2: these two headwinds and tail.
Speaker 4: Yeah, so for a period of time, I always want
Speaker 4: to be a copper bowl and I want to be
Speaker 4: an oil bowl. The two things that undermined the combined
Speaker 4: thesis are hybrid electric vehicles. Because hybrids they're fuel efficient, right,
Speaker 4: and they carry very small, at fifteen kilowater batteries, whereas
Speaker 4: a big battery electric could have a fifty or one
Speaker 4: hundred watt kill a wat battery. Lithium into those batteries
Speaker 4: is linearly proportional to the kilowatt hours. And so what
Speaker 4: we see now globally is for the last two ish years,
Speaker 4: battery electric vehicle sales year on your growth is plummeted
Speaker 4: and is kind of getting toward flat year on year.
Speaker 4: Hybrid vehicle sales have been growing fifty percent year after
Speaker 4: year after year. So we're seeing a world where hybrids
Speaker 4: are winning the growth. They're still the minority of the vehicles,
Speaker 4: and that's bad for lithium. It's bad for copper because
Speaker 4: copper scales as well, and it's kind of bad for oil.
Speaker 4: And we were told for years that hybrids are complicated,
Speaker 4: they carry two independent modes of travel. We need batteries
Speaker 4: electric because they're so simple, and we're kind of coming
Speaker 4: to a world where people are moving back ish towards
Speaker 4: the hybrids. So at a time where a lot of
Speaker 4: capital went into lithium mining and lithium brining, we woke
Speaker 4: up and saw ev adoption break fifty percent in China.
Speaker 4: So the majority of vehicles sold in China now are
Speaker 4: electric vehicles. But the challenge is the sizes and the
Speaker 4: styles are not as lithium hungry as we would have thought.
Speaker 3: Joe, should I just keep throwing out commodities and Bob
Speaker 3: can talk to them. Okay, let's do gold. Speaking of
Speaker 3: you know, there we go. But I mean, the price
Speaker 3: action in gold has been just kind of crazy recently
Speaker 3: and record highs, So I feel like I'm asking the
Speaker 3: same question over and over. But what's going on there?
Speaker 4: So that this is one of the ones Most of
Speaker 4: the time, this too shall pass. If it's high, it
Speaker 4: goes down, if it's low, it goes up. If it's
Speaker 4: in the middle, it'll stay in the middle. I'm still
Speaker 4: in the view we have burnste here, still in the
Speaker 4: view that gold works from here and a couple ways
Speaker 4: to think about it, which is always kind of the
Speaker 4: supply and demand. We've gone back and looked at every
Speaker 4: rate cut cycle, and we've looked at every individual rate cut.
Speaker 4: In a world where rates are being cut, check and
Speaker 4: where the FED succeeds in bringing long term interest rates down,
Speaker 4: gold has always gone up. And so our view is
Speaker 4: if you think the FED succeeds, then gold goes up.
Speaker 4: Where we struggle is to what level. One The speed
Speaker 4: at which gold has moved this year surprised even us,
Speaker 4: and to the level is a bit tricky. On the
Speaker 4: supply side mining companies, gold mining companies will brag about
Speaker 4: or grades that are a gram per ton, one per ton,
Speaker 4: that's one part per million, And so to make money
Speaker 4: in gold mining, you have to take a ton of rock,
Speaker 4: blast it out of the earth, grind it to flour,
Speaker 4: find the one part out of that million, and that
Speaker 4: is worth ninety bucks today. Right a gram of gold.
Speaker 4: I've got to make a business of finding a needle
Speaker 4: in a haystack, and I got to do it for
Speaker 4: forty or fifty bucks a ton, and I've got to
Speaker 4: safely disposed of that deposit and then move on and
Speaker 4: find the next one. So it's a tough business.
Speaker 2: Has the cost of blasting out that ton and finding
Speaker 2: that graham come down with technology.
Speaker 4: Long term, Absolutely, it is stunning the ability. I mean,
Speaker 4: the fact that you can make money pulling one parts
Speaker 4: per million out of anything is remarkable. So the scale
Speaker 4: at which the mining industry is efficient boggles the mine.
Speaker 4: Come to iron ore. Iron ore is almost all iron.
Speaker 4: I can move a ton of iron ore from the
Speaker 4: Amazon rainforest safely to China for forty bucks a ton.
Speaker 4: I can't get someone to deliver most dinners in midtown
Speaker 4: for forty dollars, And so the efficiencies of the mining
Speaker 4: industry boggle the mines. Now, having said that, it appears
Speaker 4: is if geology is fighting back, right, it is getting
Speaker 4: harder and harder. The average copper mind gets deeper and
Speaker 4: deeper every year. We're moving to higher elevations, we're moving
Speaker 4: just more difficult regions. So geology is always in this
Speaker 4: fight against technology and innovation. The fact that most every
Speaker 4: commodity you buy from the earth mind metals are like
Speaker 4: ten bucks a kilogram is a testament to how well
Speaker 4: the industry's done. But it should grind. Costs of metals
Speaker 4: should grow faster than inflation.
Speaker 3: You know what else has been going up and this
Speaker 3: is very exciting for me personally. Here's my disclaimer of
Speaker 3: firstwes Well, no silver. For some reason. My dad every
Speaker 3: year for my birthday sends me one silver dollar from
Speaker 3: his collection, and because I'm getting old, I have quite
Speaker 3: a few of them now. So silver has been going up.
Speaker 3: It's not quite at a record, but you know, it's
Speaker 3: sort of been following the path of gold. Is that
Speaker 3: just an echo of the gold player? Is there something
Speaker 3: more fundamental going on?
Speaker 4: For most of this year, there's been this funny split
Speaker 4: between the precious metals platinum, gold, and silver. Were the
Speaker 4: more useful the metal the less it went off, and
Speaker 4: gold is the least useful of the metals. Right, there's
Speaker 4: very little real utility for industry, and silver is actually
Speaker 4: quite useful, especially if we think about the future of
Speaker 4: solar energy and so on the silver front, we like silver.
Speaker 4: And finally silver's beating gold this year, so silver's kind
Speaker 4: of broken out a bit.
Speaker 3: Oh, I didn't realize that.
Speaker 4: Yeah, just in the last few weeks. And what's interesting
Speaker 4: is if you went through the list of the forty
Speaker 4: largest mines that produce silver, one or two of them
Speaker 4: are silver mines. The rest are lead zinc mines, or
Speaker 4: gold mines or copper minds.
Speaker 2: So I was gonna say, and I've brought this up
Speaker 2: on the podcast before, but this reminded me a couple
Speaker 2: of years ago. I was taking an uber into work,
Speaker 2: you know, and I used to put it. The uber
Speaker 2: drivers would see that I was going to Bloomberg, like
Speaker 2: Bloomberg and like, what do you think about bitcoin? Or
Speaker 2: Dogeklin And then there was this guy who said, oh,
Speaker 2: you work for Bloomberg. I'm really bullish on silver because
Speaker 2: there's less copper mining going on in the world, and
Speaker 2: silver is a byproduct of copper, and there's a lot
Speaker 2: of solar demand, and so there's going to be the
Speaker 2: supplied demand mismatch. Was he onto something.
Speaker 4: It might have been me driving, Yeah, that's pretty well aligned.
Speaker 4: He was reading the Bracket novel. Yes, And so the
Speaker 4: answer is yes, if silver were to double overnight, there
Speaker 4: is no mine that would say, well, now we should
Speaker 4: go chase silver. So the largest silver mine in the
Speaker 4: world was. I think it still could be kghm and Poland,
Speaker 4: and it's a giant copper mind with a lot of
Speaker 4: silver byproduct and a lot of the big gold mines
Speaker 4: in Mexico. Silver is a byproduct, which means they love
Speaker 4: to see that revenue stream go up from silver, but
Speaker 4: it isn't the primary driver of capital decisions, investment decisions,
Speaker 4: or supply response, and so it would take a big
Speaker 4: price signal from silver to convince much of the world's
Speaker 4: supply to do much more than they're doing already. But
Speaker 4: we will mop it up with solar panels over time,
Speaker 4: plus the other industrial uses.
Speaker 3: Joe, when are we going to interview your uber driver?
Speaker 2: Our producer Call is supposedly working on that, so yeah, yeah,
Speaker 2: we're in touch with him. I think he's going to
Speaker 2: come at some point. We're going to make that episode happen.
Speaker 3: That'll be fun. So I hesitate to ask this question
Speaker 3: because you know, politics are everywhere and inescapable at the moment,
Speaker 3: But we do have a presidential election coming up, and
Speaker 3: we have two candidates who seem to be, you know,
Speaker 3: in different positions when it comes to the energy transition.
Speaker 3: What are you watching out for there?
Speaker 4: There's three events that have kept a lot of institutional
Speaker 4: energy and oil investors on the sidelines over the last
Speaker 4: several months. And the idea is, broadly speaking, if I
Speaker 4: go to Las Vegas and go to any game of
Speaker 4: the casino, on average, I'm going to lose, right, So
Speaker 4: I shouldn't go. If I throw money at the stockmore blindly,
Speaker 4: over time, it's going to compound high single digits, and
Speaker 4: so I can kind of throw money in and so
Speaker 4: therefore to make money, it's like, well, I think markets
Speaker 4: go up, and let me find some ideas. And in
Speaker 4: oil markets right now, you have to get three independent
Speaker 4: variables or decisions or outcomes right in order to figure
Speaker 4: it out. And if you're as good at figuring out geopolitics,
Speaker 4: that you get one out of two and then one
Speaker 4: out of two and there's a one in eight chance
Speaker 4: you're going to get it all right. So those are
Speaker 4: so one has been this constant, this de escalatory escalation
Speaker 4: between Iran and Israel. Right what is the geopolitical premium
Speaker 4: in the oil price? And we woke up Monday with
Speaker 4: oil down five percent because the latest Israeli response was
Speaker 4: extremely measured and disciplined and not the attacking of nuclear
Speaker 4: or the attacking of oil infrastructure that the people had
Speaker 4: worried about, and we've been seeing that all fall, this
Speaker 4: sort of measured escalation, and so you had to get
Speaker 4: that right. And then you have to get the election
Speaker 4: right in terms of oil price, and then you have
Speaker 4: to get the OPEC Thanksgiving meeting right in terms of
Speaker 4: oil price. And then you wake up in January and
Speaker 4: you have to decide what is China oil demand going
Speaker 4: to do next year? This year has been stunningly poor
Speaker 4: for Chinese oil demand growth, So you got to get
Speaker 4: like fourth geopolitical things right. That's tough. Flipping coins on
Speaker 4: him would be tough, and so most investors are simply waiting.
Speaker 4: The way I'd frame it, at least in terms of
Speaker 4: the election is, if it is a Trump presidency, you
Speaker 4: can sort of believe he will do things like he
Speaker 4: did last time, and then you have to separate it
Speaker 4: into micro things he'll do around oil and the macro
Speaker 4: things he'll do, like tariffs. Right, so somebody will have
Speaker 4: a view on what his tariff policy is. But if
Speaker 4: I just look at the oil sector, we know under
Speaker 4: the Trump administration, sanctions on Iran were much more severe
Speaker 4: than they are today, and so you could take a
Speaker 4: million or two barrels off the market from Iran. And
Speaker 4: he's no huge fan of Iran, so you could imagine
Speaker 4: that decision wouldn't be that difficult for him. That would
Speaker 4: strengthen oil price. Under Harris administration, you sort of assume,
Speaker 4: for lack of clarity, more business as usual continuity with
Speaker 4: Biden and so no radical reaction to Iranian sanctions. And
Speaker 4: so I've been arguing for most of this year. I think,
Speaker 4: starting in January, that Trump would be good for oil
Speaker 4: price in that regard, and I've had a majority of
Speaker 4: investors push back and worry about drill, baby drill. Where
Speaker 4: he would be bad for oil price. Well, time will tell,
Speaker 4: but ultimately it's much easier to put sanctions in place
Speaker 4: on Venezuela or Iran than it is to convince an
Speaker 4: oil and gas industry that's pretty mature, pretty grown up,
Speaker 4: pretty disciplined to drill, baby drill.
Speaker 2: I think I just have one last question. But since
Speaker 2: I like hearing you talk geology and science, I like
Speaker 2: the price stuff, but most you know, there are other
Speaker 2: people in the world who could talk price stuff. Can
Speaker 2: you talk about lithium brining and what that means and
Speaker 2: how that'll work.
Speaker 4: So broadly speaking, two places define lithium mines and brines,
Speaker 4: and up until now the brines have been Let me
Speaker 4: go to the most remote places on the planet. I'm
Speaker 4: going to go to high altitudes and to these ancient
Speaker 4: lake beds, these salars, these salty, dried up lake beds,
Speaker 4: and the Atacama has this lithium triangle that spreads between Bolivia,
Speaker 4: Argentina and Chile, the world's hugest endowsment. You go up
Speaker 4: into the highlands of Tibet and you can find similar
Speaker 4: so in Tibet, for example, Chinese companies are drilling wells
Speaker 4: right again, which is kind of funny where we've come
Speaker 4: full circle from my oil and gas roots. You drill
Speaker 4: for uranium, you drill for oil, you drill for gas,
Speaker 4: you drill for lithium brines. You pump this very salty
Speaker 4: brine to the surface, and historically you let it evaporate.
Speaker 4: You did the same thing the French have done on
Speaker 4: their coasts for years, and you create seldom are the
Speaker 4: beautiful sea salts. But you don't want the sodium chloride,
Speaker 4: you don't want the table salt. You want the lithium,
Speaker 4: and so we've been doing that for a very long time.
Speaker 4: It's economic even doing it in these remote areas, and
Speaker 4: then slowly and now quickly over time there is a
Speaker 4: technology disruption. And so one of the reasons I have
Speaker 4: to cover all of these various commodities is the shale
Speaker 4: industry destroyed the oil patch. And the reason that shale
Speaker 4: was such a disruptive technology was threefold. First, it's small
Speaker 4: little units of capex ten million dollars a well, not
Speaker 4: a billion dollar platform. Second, you get a quick response.
Speaker 4: I get oil two quarters later, not five years later.
Speaker 4: And third, we drilled one hundred thousand shale wells and
Speaker 4: we got smarter and smarter and smarter. So Wright's law
Speaker 4: that natural learning curve mattered. So why am I talking
Speaker 4: about this in dlee? Well lithium is now being commercialized
Speaker 4: with a new technology it's been around well dl E
Speaker 4: direct lithium extraction, where instead of laying that briny liquid
Speaker 4: out in the sun and letting mother nature evaporate it,
Speaker 4: I'll do it in a tank. And so if you're
Speaker 4: about a year ago, is when X Mobile announced their
Speaker 4: plans to go to old oil field areas They're going
Speaker 4: up into Arkansas and they are drilling wells to pump
Speaker 4: out brinds from the Smackover formation, and they're going to
Speaker 4: put it in a facility that doesn't look any different
Speaker 4: than an Amazon fulfillment center, and they're going to extract
Speaker 4: that lithium and by twenty thirty they want to have
Speaker 4: a million cars worth of lithium. An equanor next door
Speaker 4: in Arkansas wants to do the same thing. That technology works.
Speaker 4: We saw Rio Tinto in my coverage spend paying almost
Speaker 4: one hundred percent premium on a company that is leading
Speaker 4: the industry in terms of direct lithium extraction. So there's
Speaker 4: a disruptive technology that comes into the bottom of the
Speaker 4: cost of on lithium. So that's the future of lithium
Speaker 4: is will the industry get more lithium from old oil
Speaker 4: fields or will they get it from the slars of
Speaker 4: the high altitude andies.
Speaker 3: Joe and I learned the hard way that commodities can
Speaker 3: in fact evaporate when they're in container because I had
Speaker 3: a small glass jar of crude oil and I left
Speaker 3: it in the office when I moved to Abu Dhabi
Speaker 3: because I figured I couldn't take a jar of oil
Speaker 3: on a plane and it's slowly evaporated in the office,
Speaker 3: for which I apologized, Joe.
Speaker 2: That's okay. I don't as far as I know, I
Speaker 2: didn't get sick. Wait, I have one tiny, tiny question,
Speaker 2: and I just want to end it. Back on uranium.
Speaker 2: What is the role of nuclear weapons decommissioning in the
Speaker 2: uranium supply?
Speaker 4: That's an excellent question, and so as a geologist, I
Speaker 4: can go by mine by mine and add up all
Speaker 4: of the uranium supply. There are three other places that
Speaker 4: you can get uranium from. I can go to old
Speaker 4: uranium tailings and enrich those. That's never going to be
Speaker 4: the bottom of the cost curve. They wouldn't be sitting there.
Speaker 4: The other is government stockpiles can release uranium. And the
Speaker 4: third is I can accelerate the conversion literally almost literally
Speaker 4: swords to plowshares and start moving decommissioning warheads and using
Speaker 4: that as a supply. What I would say is the
Speaker 4: government is not in the business of making money, So
Speaker 4: I don't really worry that there's some government bureaucrat that says, oh,
Speaker 4: uraniums at one hundred and town bucks, let's put some
Speaker 4: of our volumes into the market. It will almost be
Speaker 4: like gold. Right, as gold price goes up, governments actually
Speaker 4: buy more. It's almost the reverse of what you'd expect.
Speaker 4: And so if uranium price goes up, it's highly unlikely
Speaker 4: that governments are like, let's make a quick buck. Instead,
Speaker 4: they will see that as a strategic stockpile.
Speaker 2: Bob Brackett, I can't think of any other guest where
Speaker 2: we would go from the highlands and Tibet to a
Speaker 2: random place in Arkansas. It's nuclear weapons decommissioning and it's
Speaker 2: effect on the uranium price, but there's no doubt we
Speaker 2: could do it to you. Thank you so much for
Speaker 2: coming back on online.
Speaker 4: Absolutely my pleasure. Thanks Joe, thanks gas seeing.
Speaker 2: I love talking to Bob. They're so fun.
Speaker 3: Yeah, he's one of those rare guests where you can
Speaker 3: just sort of throw out anything and literally answer expertly.
Speaker 2: Ohmercaief is kind of like that, And he's another one where, yeah,
Speaker 2: you just have there was just no doubt that if
Speaker 2: you throw something out, he's going to have some extremely
Speaker 2: granular knowledge of what he's talking about.
Speaker 4: Yeah.
Speaker 3: Brad Setzer as well is one that sticks in my mind. No,
Speaker 3: that was fascinating I do wonder. First of all, I
Speaker 3: feel like there's this weird, like overarching theme when it
Speaker 3: comes to these commodities where people get really like emotionally
Speaker 3: attached to a lot of them. You know, I don't
Speaker 3: think anyone treats like US treasuries in the same way
Speaker 3: they treat like the same uranium or gold or something
Speaker 3: like that. So that's kind of interesting why that happens.
Speaker 3: And then secondly, I was thinking about the prospects for
Speaker 3: nuclear energy, and it does. I take Bob's point about
Speaker 3: how you're actually measuring the cost and that things like
Speaker 3: Elco aren't going to take into a out the stability
Speaker 3: of nuclear power, but I do wonder as the cost
Speaker 3: curve comes down for stuff like solar, if you know,
Speaker 3: maybe some of the appetite for nuclear kind of ebbs.
Speaker 2: Yeah, we'll have to see. I mean, to my mind,
Speaker 2: there's still just so much incredible uncertainty about what the
Speaker 2: energy mix looks like in five years, ten years, twenty
Speaker 2: years and beyond. You know, Bob said something that was
Speaker 2: like this major light bulb moment for me in that conversation.
Speaker 2: I've always thought commodity people are a little bit screw loose.
Speaker 2: Many of them, not Bob, but you know, like especially
Speaker 2: that people get really culty about commodities and stuff like that.
Speaker 2: And then he said, all commodity people are aware that
Speaker 2: their business is disappearing. And it's like, you know what,
Speaker 2: if I were in a business like that where every
Speaker 2: day I woke up.
Speaker 3: And knew it, you'd be a little weird too.
Speaker 2: Yeah, It's like, Okay, I get it. I forgive you. You're
Speaker 2: in a business where every day like there's less and
Speaker 2: less of it in the world and people are trying
Speaker 2: to substitute away from it. I get it, all right.
Speaker 3: Shall we leave it there?
Speaker 2: Let's leave it there.
Speaker 3: This has been another episode of the Odd Loots podcast.
Speaker 3: I'm Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 2: And I'm Joe Wisenthal. You can follow me at the Stalwart.
Speaker 2: Follow our producers Carmen Rodriguez at Kerman Arman, Dashel Bennett
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