Chronicle of October 2023
Chronicle of October 2023
Worst President for Smaller Companies, France’s Quest for Uranium
(Big) Government intentions usually affect things in opposite ways. LBJ’s war on poverty incentivized people to be more dependent on government, destroyed many traditional nuclear families1, and produced big inflation in the 70’s. Green agenda (so far) benefits fossil fuel companies, a lot. On the other hand, learning from the case of OECD countries, the trend of lower and lower corporate taxes —of which many believed would decrease government income— generated bigger corporate tax revenues for the government of those countries as a % of GDP.2
Progressive agenda of Bidenomics —of which many believed would uplift less fortunate people— has been beneficial to top corporations in America. Not to smaller cap companies, and definitely not to the average working class that need to work extra hard to catch up with the rising living cost.
Common sense would say that smaller companies generate better growth, fundamental expansion, and eventually better returns for investors. Is that the case for a president with the promise of building economy for ordinary people and not giant corporations? Let’s see a simple indicator below.
Magnificent Seven stocks (biggest giants among giants) dominate U.S. market return. In fact, about half of companies in large cap categories still performed negatively in 2023. How about much smaller companies? Well, this is not an era for mid and small cap investors. Even during Bush 43 era with the event of global financial crisis and stock market crash, mid and small cap stocks still performed much better than those of large cap stocks.
Uranium
The underreported coup in Niger has had a ripple effect on the global uranium market.
It’s an irony that all countries that use nuclear energy are importer of either uranium or enriched uranium. More interestingly, many uranium exporter countries are either in politically unstable countries, or are in geopolitical hotspot.
Even though uranium is found everywhere, even in seawater, only a few countries produce it. The top five nuclear-producing countries account for 85% of the global supply. A minor mishap in these countries can disrupt the entire uranium supply chain.
Last February, there was a coup in Niger, a Saharan country in west Africa. General Tchiani overthrown existing President and started a military junta. The coup did succeed in just a month. General Tchiani was sworn in as President on March, despite international condemnation. The coup was followed by several months of power consolidation, helped by Russian’s Wagner mercenary. And at the final moment, following an ultimatum from the junta, France rushed to evacuate 600 of its French nationals in just 3 days in early August.
What is Niger for France?
Niger is the 7th biggest uranium (U3O8) producers. In 2022, Niger produced over 2000 ton Uranium, or 4.1% of global supply. Uranium is Niger’s biggest export product. It accounts for 70% of Niger’s total exports.
There are seven uranium mines in Niger. Those mines are largely operated by French companies, with quite significant interest from China and, to some extent, Spain.
· Arlit Mine: Orano (France)
· Imouraren Mine: Areva (France)
· Somair Mine: Orano (63.4%) and Sopamin (Niger, 36.6%)
· Cominak Mine: Orano (59%), Sopamin (31%), and Enusa (Spain)
· Taghalalt Mine: Orano (59%), Sopamin (31%), and China Nuclear Corp (10%)
· Azelik Mine: Somina (Niger, 50%), Orano (25%), and China Nuclear Corp (25%)
· Gossolane Mine: Orano (63.4%) and Sopamin (36.6%)
Niger is the second largest uranium supplier to France, accounting for 20% of France’s uranium import. The largest supplier to France is Kazakhstan (27%), and the third largest is Uzbekistan (19%).
The new junta is not a French ally, preferring to go to court with Russian assistance. The coup could result in France losing 20% of its uranium supplies, despite the fact that Euratom, the European nuclear energy agency, stated that the EU and France have three years of uranium stocks.
Even if the junta did not prevent Niger from exporting uranium to France, it certainly demanded much higher prices.
Having said that, President Macron of France visited Kazakhstan and Uzbekistan last week. These two countries are France's main and third-largest uranium suppliers, respectively.
There, Macron will not face Russian interest, but China’s. Kazakhstan and Uzbekistan were the first two countries China’s President Xi visited after COVID-19 in 2022.
China, which is building 21 nuclear reactors, will require far more uranium than France. However, unlike France, which is 62% powered by nuclear, nuclear accounts for only 5% of China's electrical use. For France, the stakes are far bigger. Thus, they must be ready to pay higher.
https://www.heritage.org/marriage-and-family/commentary/the-war-poverty-50-years-failure
https://www.cato.org/blog/oecd-plan-raise-taxes-based-faulty-data