Hi Young,
This year has been tough on commodity markets with the recent concerns around a US led global recession only intensifying the selling.
The uranium sector has been under significant pressure since last May and we’ve certainly underestimated how far the sector would drop, especially as the pullback in the underlying uranium price has been far more orderly, though, this relies on longer term contract pricing. While we are not happy with our entry into Paladin (PDN) for our Active Growth & Emerging Companies Portfolio’s and Cameco Corp (CCJ US) for the International Companies Portfolio we remain positive on the nuclear thematic. Even with Kazatoms increased outlook for production, the market will, in our view, still fail to meet demand in the coming years.
- we are bullish the nuclear story and would be buyers if we didn’t already carry exposure across our portfolios.
Copper is a fascinating commodity at the moment, global electrification is an extremely bullish long term macro backdrop but the short-term recession fears combined with a sluggish Chinese economy is weighing on the industrial metals and respective stocks – we are long Sandfire (SFR), Freeport McMoRan (FCX US) and AIC Mines (A1M) for direct Cu exposure, it’s been a tough few weeks! We have no plans to increase our exposure but we continue to like Cu over the coming years. Better growth numbers from China and the US are the key.
Regarding marginal cost of production and becoming uneconomic, we’re not yet near that level. All companies are different; however Freeport has a cost below $US2/lb.
