Guys / Gals -
Noticed the Uranium ETF (URNM) Poll that is currently live. ESG as an investment theme is coming along like a freight train but it’s the second order effect that makes so much sense with URNM. Wanted to drop a quick line here because I want to advocate for this mAsset add.
For the goals of this post we will be discussing ESG investment regarding energy policy…specifically the transition to renewable energy and the extension / upgrades in the electrical grid and supporting systems that will be necessary.
TL/DR - Politicians are pursuing ESG renewable energy goals through legislation. Legislation creates legal mandate and government supported investment directionality, both of which are very hard and slow in being unwound. This creates a magnificent investment opportunity in the first and second order effect of this policy. In the First Order, the raw materials necessary to pull this evolution off are simply not available (copper, nickel, lithium, gold, platinum etc) so investing in these is very interesting in the first stage. In the Second Order, economies will be forced to revert back to a hybrid energy production schema utilizing fossil fuels and most importantly for this thread, other clean energy sources in a bid to attempt to stay within legislated mandate - those included hydrogen solutions for larger vehicles (this is the platinum trade as platinum is necessary in the hydrogen systems) and uranium for nuclear power. Considering this uranium is one of the most dislocated commodities ever.
For more info read on!
Here’s a few assumptions and considerations:
+ESG, thematically, is going to be crucially important to the macro investment landscape in the coming decade. However, there is one glaring problem - the politicians that are enacting the legislation that will drive ESG are disconnected from the reality of executing that policy. Another point of consideration is that although society may want (and need in the case of global warming / destruction of natural places / industrial fishing - pick an environmental topic that needs addressing) and it is the goal of a politician to enact the will of their constituents - no one, and I mean no one - has done the math as to how these goals will be achieved. Let’s for example take copper - take this quote from the Copper Alliance - “Currently, global copper reserves are estimated at 830 million tonnes (US Geological Survey [USGS], 2019) and annual copper demand is 28 million tonnes.” Here is another article from Bloomberg - the uptake is " The copper industry needs to spend upwards of $100 billion to close what could be an annual supply deficit of 4.7 million metric tons by 2030 as the clean power and transport sectors take off, according to estimates from CRU Group. The potential shortfall could reach 10 million tons if no mines get built, according to commodities trader Trafigura Group. Closing such a gap would require building the equivalent of eight projects the size of BHP Group’s giant Escondida in Chile, the world’s largest copper mine."
- Regarding Uranium specifically
- Marcelo Lopez is a leading analyst on uranium. Here is a recent appearance of his in the UK. In a nutshell, and from the World Nuclear Association, “Today there are about 440 nuclear power reactors operating in 32 countries plus Taiwan, with a combined capacity of about 400 GWe. In 2019 these provided 2657 TWh, over 10% of the world’s electricity.” The ENTIRE uranium industry is currently worth about $22b off from it’s ATH of $150b. (For a comparison, 91.5% of all coal produced goes to power plants, the coal industry world wide is worth $1.02 trillion 91.5% of that gives us $933.33 billion - that large number represents an approximation of what it costs to use coal to produce about 37% of the worlds power.) The market is way way way way undervalued.
There are many other reasons but I felt these were worth getting down. The reason that I am so excited about this is because I think we are going to be able to build super interesting ways for individuals and firms to get exposer to this and other trades that might otherwise be hard to access (in the case of an individual overseas) or might be unpopular to explain to shareholders (in the case of fossil fuel investing against a background of woke investors). As companies start tasking other companies to run their crypto treasuries this could be super interesting.
Thanks for reading, let’s discuss!