The Sprott Physical Uranium Trust (TSX:U.UN) has made an impression since launching this past summer, spurring newfound excitement about the uranium sector and helping to kick off a long-awaited price rise.
Speaking to the Investing News Network, John Ciampaglia, CEO of Sprott Asset Management, said he sees a variety of reasons for the strong interest in the trust, with transparency being a key element.
“I think the trust acts as a really good proxy for what the spot uranium market is doing every day,” he explained.
“That transparency I think helps the fund trade more efficiently in terms of its net asset value market value; (it) gives investors the confidence to understand and the knowledge to understand exactly what does the trust hold every day, what’s it doing. And that transparency we’ve received great feedback on.”
Ciampaglia believes uranium attention is still in its early stages, and said he’s had conversations with institutions that invested during the last uranium bull market but may not have been paying close attention since then.
“That, to me, is a really good sign,” he said. “It doesn’t mean they’re all going to come rushing back in, but the uranium market is not a very big market compared to say the oil and gas market and other commodity markets. It doesn’t take a lot of capital to come from the generalist pool of capital to make a ripple in the uranium market.”
The Sprott trust has become a key source of uranium demand, but utilities remain important as well. These entities are notoriously opaque, but Ciampaglia offered some insight on what they may be thinking right now, saying they are trying to understand how the Sprott trust and other developments have changed the market.
“Everyone is looking for this new contract cycle — when is it going to pick up, where are these deals going to get done in terms of term and price?” Ciampaglia explained. “Everyone’s looking for these signals in terms of where the longer-term price of uranium is going to drift to.”
It’s tough to pinpoint when that will happen, but the timeline is connected to when uranium miners feel comfortable bringing production back online. “I would argue that even at US$43 (per pound), we’re a long way off from where the market needs to go to reset itself,” he said.
For investors, Ciampaglia said his best advice is to get educated and set realistic expectations.
“These things take time to play out. It’s a long-term story that we’re advocating here — this is not just a ‘to the moon’ kind of thing. So ‘be realistic about your expectations and do your homework’ I think is probably the best advice I’d give most investors,” he concluded.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
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