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Uranium gets hot and hedge fund scores

Uranium prices are rising and we believe a small number of hedge funds betting on the slumping market 10 years ago in the nuclear accident will rebound.

According to price tracker UxCLLC, uranium prices reached a eight-year high of $ 44 a pound this week. According to traders, it follows the launch of exchange-traded funds by Splot Asset Management LP, which recently bought large amounts of uranium after raising funds from shareholders and emerged as an advantageous trading tool in its own right.

After the 2011 nuclear meltdown in Fukushima, the turnaround in nuclear fuel, whose prices plummeted, strengthened the share of miners, including Kameko. Ltd

CCJ -0.57%

And Denison Mine Ltd

DNN -1.23%

Uranium Energy based in Canada and Texas Ltd

UEC -1.82%

This boost has benefited hedge funds such as Segra Capital Management and Sachem Cove Partners, who have bet that uranium will bounce back.

Traders say the surge in uranium, an element produced in rods that fuel nuclear power plants when enriched, reflects, in some respects, the 2021 rise in GameStop’s share. increase Ltd

And AMC Entertainment Holdings Ltd

Hedge funds and family offices have invested in newly listed trusts. According to traders, retail investors’ interest is not in finding open prices in larger markets such as oil and gold, but also in raising prices in markets that consist primarily of private agreements between buyers and sellers. … apparently …

Kevin Smith, Managing Director of Energy and Metals Trading at Traxys Group, one of the world’s largest uranium traders, said:

Uranium, a utility, miner, and professional clutch sanctuary, is usually unlikely to stir the imagination of the general public. 70% to 80% of ore concentrate is sold to nuclear power plant utilities on long-term contracts. Spot markets are usually quiet. To buy a form of lightly processed uranium called U3O8, investors need an account at one of three processing facilities in France and Canada, and US futures contracts are rarely traded.

Uranium prices have been sluggish for years after the collapse of the Fukushima reactor in 2011. Concerns about nuclear safety have prompted Japan, Germany and other countries to shut down their reactors, resulting in excess fuel demand.

Segura Capital Management spy on opportunities. The Dallas hedge fund launched the uranium fund in 2018. Uranium traded between $ 20 and $ 30 per pound, close to the post-Fukushima lows and predicted that large miners would cut production. Segura thought the price would rise when market participants realized that the supply of uranium was less than what was implied by its low spot price.

“Fukushima has had a very devastating impact on the industry,” Segura founder Adam Rodman said in a recent interview with The Wall Street Journal. The uranium mining sector was “left for a sort of dead,” he said.

Recently, uranium bulls have claimed that nuclear power is needed to reach the global goal of reducing carbon emissions in the coming years, which will boost the uranium sector.

Segura, which is investing in uranium and nuclear stocks, has more than doubled in the year to Friday due to a 20% boost in August and a return on investment, including an additional profit in September. People familiar with the company said they were. Segra manages $ 300 million. Meanwhile, Sachem Cove, a uranium-focused hedge fund of about $ 200 million, made more than 30% profit from September to Friday, with annual profits more than 100%.

Much smaller uranium funds managed by Azarias Capital Management LP have risen 97% in the year to Friday, including a 35% rise in September, according to people familiar with the company.

The rally also benefited Light Sky Macro LP, a $ 1 billion macro hedge fund that made about 5% profit in the year to early September, a company official said.

The price of uranium rose in mid-August when the Sprott Physical Uranium Trust began issuing new units for purchasing physical materials. When an investor bids on the stock price of a trust, Sprott can create a new unit to raise money and use the cash in the uranium market to raise the price. A spokeswoman said Sprott bought about £ 9m.

“Public utilities are in the spotlight. I know that some utilities call us and ask a lot of questions,” said Sprott Asset Management’s CEO. Said John Ciampaglia. Some traders said they expected to buy the trust and benefited from Sprott’s bid.

The Toronto-listed trust aims to expose shareholders to uranium prices without purchasing and storing radioactive material. Sprott has previously sought to open up the gold and silver commodity markets to investors with two separate trusts.

Trust shares have risen 49% since their listing in July, but fell 14% on Tuesday as the 30 Dow Jones Industrial Averages fell for the ninth time in 11 days.

Another group of funds is gaining momentum in the market, buying uranium entirely rather than mining stocks. Anchorage Capital Group and MMCAP International Inc., companies based in the Cayman Islands known for lending to cannabis companies, have recently bought nuclear fuel at a higher price, according to people familiar with the matter. It is one.

Anchorage has previously made a profit from investing in uranium, people familiar with the company said.

Not everyone is a uranium evangelist. Matthew Zabloski, managing director of the $ 180 million hedge fund Delbrook Capital Advisors, said there is still plenty of uranium available. Delbrook is seeking bets on several mining stocks and may also take a short position on Sprott’s confidence, he said.

“There is no political support for nuclear power worldwide,” said Zabloski. “It will end in tears … this is the same as the AMC rally in my mind: the fundamentals are still broken.”

Write to Juliet Chung (juliet.chung@wsj.com) and Joe Wallace (Joe.Wallace@wsj.com)

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Uranium gets hot and hedge fund scores

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