3 Ideas: How to Invest in a World in Transition

29:24And I just feel at the moment, you know, I think there are a lot of people that will appear, Samuel, on your show and on Real Vision and on X, who will purport to be uranium geologists. These guys have been there since 2011. They've worked with the communities. They won't start mining the pounds, and it shows you how glacial everything in uranium is, until 2029. Nothing moves quickly. So anyone who comes to you with a get rich quick scheme, like I've found pounds, we've pegged the pounds, whatever, it ain't true. And I think for me, the reason I selected Vision was because the concept of fiduciary responsibility, both to the local people, the miners, but also to shareholders as well.

30:05And you can see from the share price chart, they have returned to shareholders. I think there's a lot more to do, a lot, lot more to go from here as well. And I can't think of better custodians, and I own the shares. Well, if we go back to that chart, I think a lot of folks looking at that would say, it looks like it's had its good run right now. Is this the right time to get in? Can you answer that question? And what's your time horizon? Yeah, I mean, it comes back to the point I made is I cannot think of any commodity that's gone up five times and no supply has gone online. We're dealing with something which doesn't have the normal supply-demand parameters, like the price goes up, supply comes online, find an alternative.

30:43you know we wrote a report before Christmas which is available on our website oceanwall.com looking at the risks of uranium and probably the biggest risk is fusion so fusion against fission is the conjoining of the isotope 235 and also hydrogen isotopes rather than the uranium isotopes but the commercial application is not until 2014 you know it's very difficult I mean people talk about oh we can get seaweed extraction well that doesn't stop until $200 a pound There's nothing out there that disrupts this. Now, you know, you'll probably at the end, I won't, you know, go to the panel and say what keeps me up at night.

31:21There are things that keep me up at night about the trade. But I certainly feel at the moment when I've got a global market cap, uranium, and uranium is not just miners and sequesters. I have people who buy and store it like yellow cake and sprot. You have producers like Hamaco. You have these explorer producers like Vision. And then you have the enrichers. its$60 billion global market plan. That's one-tenth of the EV of ExxonMobil. This is tiny. And the apex predator in this trade is the hedge fund. Because when the hedge funds get involved in this, this thing will absolutely roar. And the reason I say that is back in 2006, 2007, although it was the fuel buyers who wanted fuel for their power reactors, it was the hedge funds that got in front of them.

32:08And it won't take much to move this because it's such a tiny market plan. Now, we've already started to see rule-like disclosures from some hedge funds owning this in certain names. I actually think this will begin to happen. And it comes back to that point, Samuel, as well about alpha. This is pure, unconstrained alpha that sits within this trade at the moment. I think what we will begin to see is people who probably said, oh, it's too small for me. I think, well, hold on. And you'll hear this in Mayfair and out in Connecticut. A lot of people were saying, uranium was going to make my year. There's a Bloomberg article, I won't name who the hedge fund is, a good year last year.

32:44They see this and oil as their stocks of the year, and it won't take long until you begin to get that traction. And it doesn't have the liquidity for the hedge funds to fully manifest the trade, which is why it's so exciting for your viewers, listeners, for high net worths, for small family offices and retail investors. But you have to be patient. You can't allow yourself the vicissitudes of the market to disrupt the way in which you're looking at this. You're very convincing, and you clearly know the market and the players here, but you said there's nothing that could stop this. So what could stop this?

33:19So what could stop this is there's something so terrible that it derails the nuclear renaissance, and that, for me, is a horrific nuclear accident. And to tell you the truth, it won't really matter if that happens anyway, because I think we'll have bigger things to worry about. Now, to derail the nuclear renaissance means that you have to effectively talk about no new builds and potential shuttering. So it has to be a safety flaw that so almost becomes endemic with a certain type of reactor. But I think what you find now with the post-Fukushima and Chernobyl is how safe and secure these are. I think it's very interesting with the bombing of the Zafariya pressurised water reactor in Ukraine at the start of the Ukraine-Russian invasion.

34:05you remember it was being kicked and everyone's heart and what people were doing is oh no if you if you drop a bomb on a nuclear power station it's a double nuclear accident well that's not true because one is fuel rods uh enriched to five percent U235 the other one is nuclear bomb which we talked about earlier 90 but what happened was Zafariya which is the largest pressurized reactor in Europe stood up and there's now features we can whip out the fuel rods in nanoseconds from these reactors. There's kill switches everywhere. So they're very, very safe. It would be something like that. It'd be something so horrific, but to tell you the truth, Samuel, I don't think you would, I think money would be the least of our problems.

34:45I cannot see anything at the moment derailing this trade other than something that, oh, there is one thing, governments. You know, I think governments could suddenly go, right, enough's enough. We've had enough of this. We are going to start sequestering uranium back off companies themselves, but they'd have to pay market price. But some form of nationalization, I think, would be the thing that's going to be. I was going to say it would be another tsunami, it sounds like, but even in your mind, you're saying that you think the safety procedures have improved so much that even that doesn't deter you.

35:20The other thing as well is nuclear power stations have 40-year minimum or 40-60-year plant lines. So even if a carer waxed out, you've got to carry on fueling the existing reactors. Now, existing demand for uranium is£190 million a year. Supply last year was£135 million. And that's been going for years and years because the break-even costs are so low, mines have shuttied. So you've got this cumulative gap between supply and demand exacerbated now by Sprott buying uranium, Yellow Cake buying uranium, and hedge funds in the market buying uranium, and taking it away from the power companies. Now, I think what will happen next is you'll start seeing nuclear power companies who are their RFPs are going unanswered, suddenly going, right, what price do I pay?

36:07You know, they're 106 on the screen. I'll pay 130 for pounds. Once you see that print, then the panic takes in. And I'm on record in the Financial Times last year of saying 250. And, you know, people, you know, not laugh, but they thought that's that's quite punchy. And I feel a little bit like on the classical analogy, like Cassandra on the walls of Troy. I can see the Greek ships. I'm telling everyone the Greek ships are coming, but people are only just beginning to listen. And as I say, from the first meetings we had four or five years ago with sort of Yellow Cake, you could get everyone into a phone box.

36:39Now, people are really listening. But again, I don't think people understand the asymmetry of this trade, that it will move, and it will move in big gap notes back in 2006. I'm just smiling because I just love the Greek imagery that you bring into it. Just to put a bow on exactly what you're saying. That's the downside for the upside of a public school education. No, no drama. No Greek drama there. Dean Myers just asking from the Real Vision community, next target price for fission and timeline for uranium trade overall? I mean, just to build on what you told the FT. So first fission. I think we've got a very long time for this because I think you can't bring supply back online.

37:22So in the US, we've been modeling mines coming back online and they will do them. We've probably got about£9 million of uranium coming back online within the next two to three years. Remember, global demand is£190 million. The Kazakhs have already started giving an idea that next month they'll warn on production. They do£30 million is their nameplate number. I think you'll probably see this going on for some time, but it's going to have its movements. It will have its movements, but I think if you can stay in this trade, as long as nothing terrible happens, I think this could be a five-year bull market.

37:56Okay. And so any specific... The price of Fission, look, it's a little bit how long is a piece of string, because if you believe that Uranium goes to 250, then you're saying that the EBITDA number for Fission is 2.5 billion, which means that the valuation of the company is probably, if you say it should be on five times EBIT,$10, and it's$1 now? I don't know. I just don't know. because I'm not looking at things from a company-specific target price. I'm looking at things from the Uranian top-down view and saying what's the best way to manifest that trade. Now, there are other names. I love enrichment.

38:30Maybe if you invite me back on the show, I can do enrichment in a couple of months' time. But for this call, I think the most exciting thing for Western listeners is North American towns in the ground. And I don't know whether that segues us nicely into the next trade idea. Yeah, absolutely. So your second idea is the Uranium Energy Corp. That's UEC on NYSE. It's a US-based production and exploration company operating North America's newest uranium mine. We'll bring that chart up. And it's the same question. Why this company? So, again, it comes down to best-in-class management. So Amir Nani, who set the business up over 20 years ago and stayed at the helm, they're the largest, they're the most liquid pure play in the uranium sector.

39:23The assets are North American. They're permitted, so they can start producing in Texas and Wyoming. The resource base is around£226 million. So you can look at that and times that by whatever uranium price it is on that day. they've held themselves and this is the beauty about this they operate 100 % unhedged strategy they sit there with unhedged pounds they can sell when anyone comes along and they're not locked in at any price because lots of producers have been locked in to term contracts because they're on a certain term of uranium price and here we have a company which has no debt licensed assets already to come online in an unhedged portfolio So for me, this stock, and I know you'll look at it back in 2020, they got down to 60 cents and they're trading at$8 plus now.

40:18But again, this is a function of looking at the implied pounds and timesing it by the uranium price. I think on any metric like that, it begins to look cheap. And particularly with the Inflation Reduction Act, with the Nuclear Strategic Reserve Fund, which is only buying US pounds, which UEC have already sold into. they paid a 20 % premium last year which was probably the best trade in the world because I think they paid$60 and the price at the time on the screen was 40 something now in hindsight it looks at the time expensive in hindsight what a trade with uranium at 106 they have the ability to do that Scott Melby who's the vice president there sits as the chair of the uranium producers of America world class operatives world class assets 100 % unhedged So this, for me, is the purest play on uranium in the market.

41:10Now, a lot of people say to me, but you should not own Cameco. Cameco is a big company, but Cameco did the Westinghouse deal. They're moving more into other areas of the nuclear fuel chain away from the pounds themselves. So you answered the right now, but again, specifics, any targets that you or Ocean Wall have? As a house, we don't normally have targets on stocks. What we do, as I say, we have the thesis, and then we look how to manifest that. you know where could this go to you know again if the uranium price doubles from here this year twenty dollars i mean i don't know i mean i'm never going to come on a show and talk about m &a in terms of oh it's an m &a target but i've got to say these are amazing assets and what would make you change your mind i have a feeling you might copy and paste your answer from the previous idea, but prove me wrong.

41:59I think probably what I'd do is if... I mean, it's interesting because you think about Trump coming to power next year or this year, but January, and how that would affect things. Well, Trump is very pro-nuclear and very pro-domestic uranium. It was actually him that reenacted the Cold War policy of the US Nuclear Strategic Reserve Fund. I think it'd probably be if Amir, the CEO, and Scott left. There was a big change at the board level. I'm such a big fool to them as management and how they steer this. So it'd probably have to be a change of management. But really, I mean, Amir's been there since day one.

42:41He's set it up. I think I can't sit there, but it'd probably be something like change of management and maybe change my thesis. Echoes of what Larry Lepard told us when he was on 3 Ideas talking about gold mining also in North America. So very, very similar. Are you operating just on a side note under the assumption that Trump will become, will win, not the nomination? Yes. Are you on? He'll be president. We get a lot of information from people that, you know, they're going to let him fall over with the various indictments that are against him. but I feel at the moment that a lot of people surprise me where I seem to be quite moderate liberal friends who feel that a strong man is needy, probably comes back to that point that we talked about at the top of the show which was around trusting governments and I think whatever you say about him, he does you know, people don't like him but he does seem to give you a sense of he's a strong man and he gets stuff done so So I think looking at, I think we all knew how New Hampshire was going to go.

43:48Or I think the way in which it's going to go for that this year will be, he will be the candidate naturally. And I think he's most likely to win. I think, you know, that probability I saw on spread betting was two to one that he wins. And I think we're modeling for that scenario. Yeah, somewhat anecdotal what you're talking about, but you're the second person on Real Vision to talk about this as a probable outcome. And it's clearly affecting how you're investing. So don't always do the political thing here on Real Vision. But for your next trade, it's kind of inevitable to talk about politics.

44:21And this idea is around Venezuelan sovereign debt. I have to say, this one really made me raise my eyebrows when you and I were talking, preparing for this, because there are so many factors at play here. I mean, there was just a UK vessel sent. I think a lot of folks with everything happening in the Middle East really didn't keep track of a lot of this. but a UK vessel sent because of border and disputes over oil between Venezuela and Guyana. This is a country that I've spent a lot of time covering in my career. So I was surprised just to set the stage for this. It's sometimes difficult to trade Venezuelan sovereign debt or invest rather.

45:03So Nick recommends the FPP Sovereign Recovery Fund. But, wow, set the stage here for this. I'm probably going to ask you a few questions, because I do know that you're actually famous in Venezuela. Yeah, well, I got the wrath of Hugo Chavez when I was covering him diligently, journalistically, and sometimes when you do your job well, you get called out by name by Mr. Chavez. But he's not calling out my name anymore. Well, look, the situation with Venezuela for us was back in 2021, we started looking at some stressed sovereign names. And Cuba was trading at 8 cents and Lebanon was trading at 11 cents.

45:48And here was Venezuela trading at 5 cents. So I thought, well, what I know about Venezuela is it has more sort of oil and gas than Mexico and the US combined. It's got bauxite, it's got gold. You know, we can drill into the number now that we now have of barrel reserves and oil, and it's almost close to some tarry numbers of gas fields. And yet it has gone through the situation where after the collapse of oil prices in 2014, and this is obviously post-Chavez, you know, Maduro had become a lot more authoritarian. And we saw this massive exodus on the news of Venezuelans leaving. We saw people hungry.

46:28We had a terrible sort of political climate and the country sort of descended into this situation of sham elections. And then ultimately it led to sanctions on the country by Donald Trump. And the feeling was that this was a Marxist country. And I think inherently, I think there's still a view that it is. I mean, I know since 2006, three Russian bombers with nuclear capability have flown over Venezuela. They didn't vote, abstain the vote of the UN on the Russian invasion of Ukraine. And you'd had this sort of like U.S. coming in and they'd supported a guy called Guido, Guido, who had been this sort of like puppet in their name.

47:11Maduro was still seen as the strong man. We began to think about this and we started to think about, well, what's our downside? If the bonds are at five cents and Lebanon that owns nothing is at 11 cents, well, and they're dollarized assets, this looks interesting. So we started to really begin to map the country. And when you look at where it sits geographically, you know, it's not far down from the Gulf of the Caribbean. The crude that it, the oil that it juices is quite a heavy crude that effectively has to be distilled. But the distillation facilities are up in Florida and Florida Keys. And then the war happened, the Ukrainian war.

47:50And suddenly we begin to start seeing the situation where the world is looking for new sources of oil away from conventional sources. And obviously we have a very uneasy relationship between the Middle East and Biden. Now, if you're Biden, what are your options? You can go to the sort of theocratic Iran. No. or you could go down the road to your sort of like neighbors where you have 600 ,000 Venezuelans who have already come into your country anyway and start to think about a sort of detente. And so what's happened has been driven by the oil price. There has been a rapprochement that's taken place in the last couple of years, which effectively was articulated on the 18th of October last year with the suspension of sanctions.

48:33And it's probably just worth bringing up that chart now because it reflects exactly what you're talking about. continue nick yeah sorry so so the the the country defaulted the bonds had traded down and then the sanctions came on top and now we're in a situation where you know the the the sanctions have been suspended and what does that mean well the sanctions were quite a tax on u.s people anyway because the u.s ban on second bond dealing so all the big u.s bond houses that owned venezuelan bonds were suspended from buying or selling jp morgan emerging market index that holds these bonds, just took them out of the index completely.

49:09So not only did you have the sanctions default, you had JP Morgan selling these bonds as well out of the index, which is why they got to 5 cents. And we began to start seeing, and I can say this with my hedge fund hat on, when you get a hedge fund and you own an asset that's really priced in cents, it becomes a talking point for your investors. So normally by the end of the year, unless you're massively convicted or rally back, you get rid of it. So you began to start seeing people just dumping their positions in Venezuela because they felt that this was never going to end. And now we're in a situation where US investors can buy it again.

49:44Now, we have some numbers which we won't talk about today, but we effectively believe that Venezuela will recover rather than need to restructure. Now, previously, when you have distressed countries, you have to restructure, they have to go to the Paris Club, the IMF. Here, you have a very, very rich country. And we actually work out that if they do one and a half million barrels of oil this year, up from 700 ,000, that effectively computes at about 130 cents in the dollar. Now, they're trading at 21 at the moment. Now, that for me, again, is the kind of asymmetry I like, because I can sort of understand that even if Trump does get into the White House, as we believe he will do, again, he needs cheap oil and gas and you have your neighbours down the road.

50:28And there's another thing as well about repatriation of folk, which is, you know, Venezuelans probably want to go back, to be perfectly honest. You know, it is a historically, a historically democratic country. There's elections that take place this year. Now, the opposition party is a lady called Marina Machado. Whether she gets elected or not, you know, we're beginning to take proper stabs at democracies in this country. If you go to Caracas now, it's very, very similar to Moscow in 91. It's casinos, Ferrari garages. It has a sort of like a frontier town element of it as money returns. Chevron are there.

51:04Repsol are there. Shell are there. So we're beginning to start seeing a reopening of this country. Now, if they do, as I say, begin to start producing oil, they won't need to restructure their debt. Now, we reckon that par plus accrued, so par being a kind of an accrued interest on the bond in 60, that's 160. So it comes back to this idea of asymmetry, that what's my downside in dollarized assets? RAOUL PAL Everything that you're saying rings true for me, both journalistically and anecdotally. I have a lot of close contacts, even people still in Caracas. I know things are getting back to normal, as normal as they could be in this time span.

51:42But the thing that I'm trying to think about here is, well, the sanctions have already been lifted. So what's the next catalyst? RAOUL PAL That's a great point. They've been suspended. They've been suspended and they come to an end on April the 18th. And we believe with very high probability that they'll be extended again. So we believe that what's happening is, as I say, this rapprochement. But it's a backwards and forwards. I mean, Maduro has done some crazy things. As you talked about, the Esquibo land sits between Guyana and Venezuela, which is incredibly, not only very fertile, but is full of oil, has been an arbitration point since the 19th century when the British ceded it to Guyana.

52:25So now we have a situation where we've got Maduro doing crazy things, but that seems to have taken a bit of a back burner to think he's realised his unpopularity with this. Now, whether he wins free and fair elections and comes back into power, there is still this issue that the US need to keep Venezuela close and away from any Marxist influences and to keep that oil for themselves. So really what you're saying is kind of in spite of whatever happens in Venezuela, the fact that America is going to be so desperate for oil is or is going to continue to be even more so is really overrides whatever happens, whether it's really free or really fair elections there.

53:06Again, you've done it in a nutshell. Absolutely right, Simon. And I'm just wondering, any type of targets you have? We had that charred up. I think let's be conservative. I think let's have a base assumption of a million barrels a day, and maybe some sort of restructuring, some haircut on the bonds. I think$75,$80, so four times money. And what would make you change your mind? I'm sure a lot. I think it'd be something bonkers. I think it would be, I think it probably, and I have another view on Russia, I don't think they'll come back to the fold, but it'll be if Russia come back to the fold. And because I think, you know, if you haven't had the Russian-Krainer war and the Arab situation as well as it is at the moment, it would probably be$10,$15 a barrel.

53:59You know, we're not shy of it globally. but I think because of the geocultural tension, because of the logistical issues, because of the way in which we're polarising as a world, I think it would almost have to be a welcome break out of peace, which would probably change my thesis in Venezuela. But the country's growing at 10 % to 15%. It has a huge amount of agricultural land. It has a huge amount of mining. As I say, it's got bauxite, gold. It has a huge number of other assets. So really, it should be a recovery plan itself. So I'm quite comfortable in this trade. Yeah, it's interesting because like I said, I've anecdotally heard a lot.

54:38I still report quasi in Venezuela. And so it's the first time I've really heard investor sentiment start to match or catch up to what I've seen anecdotally, the casinos that you referenced. I just want to go back to uranium for a bit. I think you're going to say you can't answer this. You might be restricted. But Dean Myers asking his second question. Nick didn't cover ASP isotopes, but I know he likes it. Curious to hear his thoughts on ASPI versus Silix as enrichment plays. I can't talk about it, but I love enrichment. I think the way in which enrichment process works is you have to convert the gas into a centrifuge.

55:19The centrifuges that exist in the West now are limited. They require six years of capex. I think we're going to start looking for next gen. And a lot of that, I think, will be around laser excitation, which is a way in which you excite the isotopes to effectively move from 235 to U238. There are some very interesting companies out there, but I can't make any comments on any of them at the moment. But I do think enrichment is part and parcel of our uranium thesis. We've written on enrichment on our website, which, as I say, oceanwall.com, you're more than welcome to take our research. We don't charge anyone anything for anything, if that makes sense.

56:01Yeah. And then lastly, a question also from the RV community coming in. This one from Jason Kabuki. Is this the year that we all realize the world is going fully electric? And what does that mean in the markets for oil and EV producers? I don't think, actually. I'm actually, I really like lithium carbonate. I really like the Pasa in the north of Chile. I really like the Arazaro region of Argentina for lithium carbonate. But I actually feel as someone who has had an electric car and got rid of it, I had a massive issue with range anxiety or something. But I had an issue with range on the car. The actual fear of the battery life was too quick for my liking.

56:49I think we're some way off that. But I think, you know, I think the future for that lies in China. I think it's coming. But in terms of the year we go electric, I think for me, it's about energy rather than about anything else. And I start looking at some of the stuff that Sam Altman's doing in uranium. And you understand the amount of electricity that's going to be needed to power AI. And you start believing that there's going to be a big change here in terms of demand. But I think the electric car, I think we're still a couple more years off really fine-tuning that. Yeah, I don't just say as an American living in the UK, because I go back and forth so often, the gap between the US and Europe for electric charging stations is actually quite big.

57:36The US is way ahead here. I should really say Tesla, because it is just Tesla at the end of the day in the US, for the most part. And this has really been excellent. I think for anybody who's wanted to get into uranium or better understand uranium, this is a great starting point for them. So, Nick Lawson, thank you very much for coming on to your ideas, answering the questions from our community. We'll be keeping an eye on uranium as well as Venezuela and hope to have you back on the show soon. Thank you, Samuel. Have a great one. Whether you're a crypto newbie, an established investor, or operating a business in Web3, tax season can be an absolute headache, but it doesn't have to be a nightmare.

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