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Power Metal Unchanged On Uranium Update – What Will It Take To Move It?

Tim Worstall
Tim Worstall trader
Updated 10 Aug 2022

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Key points:

  • Power Metals Resources updates on the uranium portfolio
  • POW shares seem to do nothing in response
  • Why is this, why doesn't news move the share price?

Power Metal Resources (LON: POW) shares are unchanged on an update on the uranium exploration portfolio which does lead to the question – what will it take to move POW substantially? For we've clearly got increasing interest in nuclear power, in sourcing from North America and a rising uranium price. Why is this not being reflected in the share price of a would be uranium miner?

There are a couple of answers to this both of which weigh down on the Power Metal share price. There's also a third which is of lesser influence but must still be thought about. That third is just that there are many people out there looking for uranium. There are many places in both Canada and the US where there are known uranium occurrences. The American ones do find it very difficult to gain permits to mine, that's true. But this new urgency over security of supply – the US would like, for strategic reasons, to not be reliant upon Russian supplies – might well mean Federal over-ruling of local objections. If that's true then there's a potential flood of US supply into the market off in the future.

Of course, if the US doesn't get itself sorted in that manner then Canadian supply – like that from Power Metal – would become more important and logically better priced.

Power Metal Resources share price
Power Metal Resources share price from IG

Also Read: The Best Uranium and Uranium Mining Stocks To Buy

The first of our two major reasons for this news not really budging the POW share price is that the update itself is about such preliminary matters that it'll make no difference to revenues within the next, say, decade. And with interest rates rising revenues of more than a decade away are worth pretty much nothing right now. For the exploration results and decisions are not about anything so concrete as doing a definitive feasibility study or anything, they're still sampling much more generally than that. They're – to be simplistic – still tapping rocks to see what's in them. That's a necessary stage, of course it is, but it's a very preliminary one. It's a long, long, time between now and whenever any actual production might start – if it ever does – from these properties.

The second of our two major headwinds on the Power Metals share price is again that timespan. What is the uranium market going to be like in a decade or more? Sure, we can all make predictions but it relies on so much supposition about future technological change that it's not something that can be done with any accuracy. So, the usual assumption is that it's just an unknown. This means that with these development timelines – always assuming anything to worth developing is actually found – we don't look at the currently rising uranium price to try to price the value of something that might, might, turn up in decades. This is the same economic logic as our interest rate one above, discounting back to a net present value. Things that might happen off into the far future simply don't have much economic value right now.

The reason Power Metal Resource's share price isn't reacting to uranium news is that the import of it is all so far off. It would have to be a truly massive find to change that.

Tim Worstall
Tim Worstall is a freelance writer specialising in economics and the financial markets.