Hedge funds and a major exchange-traded fund with a passive position in some publicly traded stocks in Wyoming’s uranium industry are sniffing around for investment opportunities in the critical ore needed as fuel for the nascent nuclear industry.
The names are probably not familiar to most Wyomingites, but their investment strategy is to pool money from private investors and earn above-average investment returns by finding under-the-radar possibilities.
There are others, but the biggest investors kicking the tires on Wyoming’s uranium stocks include New York City-based Segra Capital Management LLC; Cayman Islands-based Fourth Sail Capital; Canada-based MMCAP International Inc.; and New York City-based Global X Management Co LLC, an exchange-traded fund that’s owned by Seoul, South Korea-based Mirae Asset Financial Group.
All the funds are targeting publicly traded stocks in central Wyoming’s Red Desert region and the energy-rich Powder River Basin in the state’s northeastern corner, according to filings with the Securities and Exchange Commission.
There is some allure with Wyoming’s uranium companies since all are involved in in-situ mining, which is a mining technique that greatly reduces exposure to environmental wastes related to uranium mill tailings.
In-situ involves drilling with water derricks that can go down a few hundred feet into a bed of porous sandstone where there’s a very thick layer of uranium deposits to tap.
The investment groups are eyeing Wyoming mining companies like Cameco, Energy Fuels, Ur-Energy, Uranium Energy Corp. and Uranium Royalty Corp. They are among the biggest players in Wyoming’s uranium industry, according to the SEC filings.
Some hedge funds began investing last year as uranium spot prices began ratcheting up double-digit price increases. Others have entered the picture as mergers and acquisitions have heated up in the space.
Uranium spot prices hit $107 per pound in early February but have since backed off to about $81.40 a pound as of Friday, according to Atlanta-based UxC LLC, which tracks uranium spot prices on a nuclear fuel exchange.
Some Cooling
Some of the aggressive investment strategy has since been scaled back as uranium prices have cooled off in recent months.
The hedge funds were attracted by the rush of uranium companies in Wyoming to lock up federal money to support some of their mining activities and processing of the yellowcake byproduct needed to fuel the nation’s nuclear power industry.
The uptick in mining happened as the United States was pivoting away from Russian sources. The move by utilities and the U.S. government away from reliance on enriched fuel supplies from Russia happened because of Russia’s invasion of Ukraine in 2022.
Jitters grew in the U.S. over getting nuclear fuel cut off from Russia as the U.S. stepped up its military assistance to Ukraine to battle the Russian invasion.
Wyoming’s senior Sen. John Barrasso spearheaded an effort to ban Russian uranium imports that was signed into law by President Joe Biden in May.
With hedge funds, there have been well-known failures, as well as moves by others to strip valuable assets in underperforming industries to make them profitable.
Think Alden Global Capital, a New York City-based hedge fund that has used the newspaper empire of MediaNews Group in Denver as an investment vehicle to buy up newspapers and then sell off real estate and layoff reporters to squeeze profits out of the business.
The Bernie Madoff scandal stands out as a worst-case scenario for a failed hedge fund. Madoff essentially ran a Ponzi scheme where the fraud was estimated at around $65 billion.
Ur-Energy CEO John Cash stands on the factory floor of his uranium processing facility used to turn mined uranium into yellowcake, a precursor to nuclear fuel made elsewhere. (Pat Maio, Cowboy State Daily)Segra’s Appetite
The investments in Wyoming’s uranium are extensive.
Since 2018, Palm Beach, Florida-based Segra Capital Management LLC has been exclusively focused on investing in the nuclear power sector and related industries.
On Aug. 7, Segra Capital disclosed ownership of 18,855,000 shares of Ur-Energy Inc., or a 5.42% ownership stake in the company.
This investment followed a $60 million public offering of stock by Ur-Energy in late July to help pay for possible acquisitions of mining claims in the fragmented uranium industry and to ramp up development of mining projects.
Ur-Energy anticipates using some of the proceeds from the public offering of 57.2 million shares to supplement working capital for the continued ramp-up at its Lost Creek mining and production site in Wyoming’s Red Desert and development at its Shirley Basin mine in central Wyoming.
“We are preparing our war chest so that we are ready for any opportunities. There is nothing that we can discuss publicly,” said John Cash, chairman, CEO and president of Casper-based Ur-Energy, told Cowboy State Daily recently.
Some of the investment appetite is driven by speculation over industry consolidation.
“All I can say is that with the rebound in the uranium market and rising interest in nuclear power and fuel demand, we are seeing a significant amount of M&A (merger and acquisition) activity in this sector,” said UxC President Jonathan Hinze.
“I am not surprised to see firms like Ur-Energy potentially pursuing acquisitions, especially as they seek to solidify their position in the market and long-term uranium supply capabilities beyond existing [and] operating assets,” Hinze told Cowboy State Daily in an email.
On May 15, 2024, Segra Capital also disclosed ownership of 339,758 shares of Canadian-based Cameco Corp., valued at $19.92 million, as of March 31, 2024.
In 2016, Canada-based Cameco Corp., one of the largest global providers of uranium fuel, curtailed uranium production in Smith Ranch-Highland, once the largest uranium production facility in the United States.
Cameco’s facilities include the Smith Ranch-Highland in situ uranium mine near Glenrock and a satellite in-situ uranium mine near Wright, as well as the Crow Butte in-situ uranium mine near Crawford, Nebraska.
Cameco also operates uranium processing factories at Smith Ranch-Highland and Crow Butte where they can produce up to 7.5 million pounds of uranium yellowcake each year that, after further processing elsewhere, becomes fuel for nuclear reactors.
Colorado-based Energy Fuels Inc. in Nichols Ranch near Kaycee, Wyoming, also has uranium mining operations that have attracted hedge fund interest.
Energy Fuels is preparing to ramp up its Nichols Ranch uranium mine for production by 2025.
Beginning next year, the Nichols Ranch and other uranium mines located in the Cowboy State and elsewhere could produce up to 2 million pounds of uranium per year, with the Wyoming mine representing “significant expansion potential,” said Energy Fuels CEO Mark Chalmers in May.
Global X Tally
In February, Global X Management Co LLC, which offers thematic exchange-traded funds that provide exposure to a range of commodities such as gold, silver, copper and uranium, picked up positions in Energy Fuels, Ur-Energy, Uranium Energy Corp. for its Global X Uranium ETF.
The fund invests 80% of its total assets in companies active in some aspect of the uranium industry, or the production of nuclear components, a Global X spokeswoman said.
In February, Global X increased its position in Ur-Energy to 14.1 million shares from 2.6 million shares, or 5.2% of the uranium company’s outstanding shares. The fund also boosted its position in Energy Fuels to 8.7 million shares from 7.9 million shares, or 5.39%, according to an SEC filing.
With Corpus Christi, Texas-based Uranium Energy Corp. (UEC), Global X upped its position to 20.8 million shares from 9.4 million shares, or 5.3% of the company’s traded shares.
UEC has plans to restart uranium production at its Irigaray central processing plant and satellite Christensen Ranch facility soon.
Both operations are in the Powder River Basin. UEC, which has its state headquarters in Casper, is licensed to produce 2.5 million pounds annually in Wyoming.
(Getty Images)Fourth Capital Playbill
Hedge fund Fourth Sail Capital also has a keen interest in UEC.
On April 12, Fourth Sail Capital disclosed ownership of 1,880,748 shares of Uranium Energy Corp., or 3.8% position valued at $12.7 million as of March 31, 2024, according to an SEC filing.
The current value of the position is $8.5 million.
On Friday, the chief financial officer of Uranium Energy announced plans to step down on Oct. 1 and be succeeded by Uranium Royalty’s financial chief.
There already exists a strong connection between Uranium Royalty and UEC.
UEC, which is a majority shareholder of Uranium Royalty, has four licensed and permitted projects in Wyoming and another three in Texas. As a royalty company, Uranium Royalty doesn’t mine and operate the projects but instead act as a financer.
Uranium Royalty earns a certain profit, or “royalty,” on its investments. The royalty it receives entitles the holder to a share of the profit realized from the sale of production from the property after deducting costs related to production.
On Aug. 2, Fourth Sail also disclosed a 5.2% passive ownership position of 18.25 million shares in Ur-Energy, according to an SEC filing.
The current value of the position is $82.5 million.
Canadian-based hedge fund MMCAP International Inc. SPC also has shown interest in Wyoming’s uranium companies, including Uranium Royalty, where it has 2.93 million shares, or just under 10% of total shares outstanding, and enCore Energy Corp., with 2.5 million shares, or 1.5% of total shares outstanding, according to SEC filings.
Texas-based enCore Energy is developing huge uranium deposits throughout Wyoming. Its top priority in Wyoming is to pull out of the ground 8 million pounds of uranium at its Gas Hills project, located 45 miles east of Riverton.
Pat Maio can be reached at [email protected].
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Publish date : 2024-08-09 10:51:00
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