The Future For Uranium

February 26, 2007 | By | Reply More

What’s been happening?

NewsShares in Uranium companies have risen four fold in the last 3 years.

The price of uranium has not had a down month since 2001.Uranium prices are quoted on a weekly basis and are currently circa US$70.00 a pound.To reach the inflation adjusted high of 1978 during the cold war, uranium would have to trade above $110.00 a pound.

It is reported that some of the worlds´ wealthiest investors like George Soros and Ted Turner have taken substantial positions in the sector.

A market analyst writing in 2005 espoused the possibility of future uranium panic buying.

Stockpiles built up in the cold war hit the market when no proposed new nuclear power generators were on the drawing board to boost demand.

In 2001 the price of uranium was only circa US$ 8.00 a pound.

Producers have only supplied around 60% of total world annual demand for a number of years, the 40% shortfall coming from government stockpiles and decommissioned nuclear weapons.

Many environmentalists are now recognizing nuclear power as the cleanest of available practical energy resources.

The 103 nuclear power plants in the United States have cut the total release of Carbon Dioxide emissions by 700 million tons annually.

There are 340 more nuclear power plants around the world with a further 30 under construction.

Cameco, the worlds largest producer of uranium recently suffered a severe setback with flooding at their 50 % jointly owned Cigar Lake Mine in Canada that was due to begin production in 2008.

This major facility was projected to provide 7-8 million pounds of uranium in the first 12 months of production and to rapidly grow to near 18 million pounds within a further 12-24 months.

By year five Cigar Lake was estimated to be able to supply 50% of all new annual uranium production.

As a consequence of the flood the near term supply outlook has been substantially weakened and to many experts it is as yet unclear when, or even if, the mine can be reopened.

However Cameco state that they are confident that Cigar Lake will eventually come into production although costs will be high.

With uranium demand outstripping supply and the expectation that over time the price will substantially increase the Cigar Lake deposit is too valuable a resource not to be accessed if at all possible.

What’s Happening Now?

Three factors have emerged to encourage the renaissance of nuclear energy.

  • Global warming caused by pollution from burning traditional fossil fuels.
  • Rapidly growing energy demands from China, India and other emerging nation  coupled with the   ongoing annual growth in the developed countries.
  • The recognition that worldwide oil and gas reserves are becoming depleted at an ever increasing rate with many analysts convinced that we have passed through the era of peak oil and that “it is all down hill from here on in”.

Add to this mix rising tensions in the oil producing Middle East, Latin American politicians increasingly taking an anti US stance, nationalizing oil production facilities and threatening oil supplies and Russia flexing its muscles by threatening to cut supplies of natural gas to European countries that do not toe the line.

Also we should not forget that Russia is now only behind Saudi Arabia as the largest oil producer. And then there are the African oil producers!

Not enough uranium is being produced to meet current needs and little is left from nuclear stockpiles.

Deficits in supply are expected to continue through 2007 and 2008.

Pundits think that uranium oxide will climb to US$100.00 by the year-end as a result of strong demand from the nuclear power sector and speculative interest.

Until recently it is the environmentalists that have successfully held up the development of nuclear energy and uranium mining.

It is only now that many are belatedly beginning to understand the damage their previous stance has caused to the environment and the less prejudiced recognize that the nuclear alternative is, for the present, the cleanest, safest and far away the most viable of energy sources.

This attitude, lobbying and short-term political advantage were the principal reasons for the worsening supply situation that has developed since 1989.

The Major Sources of Supply

Canada has the largest reserves of accessible uranium reserves and is the major world producer.

The province of Saskatchewan has a wealth of high grade uranium and there is an argument that it will become the next Canadian boom area.

Canada also is the home of vast areas of tar sands that could become an economically viable source of oil, has substantial base and precious metal resources, and above all is a politically safe country.

When, as we expect, (but who are we to know?) Cigar Lake comes on line with other mining ventures reaching fruition, Canada, already a prosperous nation, could become one of, if not the most, desirable haven for profitable and safe commodity investment opportunities whilst the rest of the stock market languishes.

Australia, another politically stable country is estimated to have over one third of the world’s recoverable uranium resources and currently accounts for 22% of total global exports from only three mines.

These three mines exceed 11,000 tons of uranium production annually with two more mines scheduled to come into production in the next few years.

Surprising then that Australia has not one nuclear power plant and relies on coal for 80% of its electricity needs.

Hopefully the growing recognition of the damage done to the Australian and Worldwide environment from their reliance on coal for electricity is beginning to dawn on the countries´ vocal and ill informed environmentalists.

The influence of the environmentalist lobby has a bearing on the astounding fact that Australia does not process its own uranium production, preferring to ship it abroad for processing and enriching, and thus losing a profitable opportunity that would benefit the government and its citizens.

There is hope for the future with Australia’s Prime Minister recently declaring that the arrival of nuclear power plants in the country was inevitable, a view backed by an intensive government report.

A further report takes the view that there is a prospect of a fourfold expansion of profits in processed uranium exports in the longer term.

The Australian Government has a much-appreciated policy of only allowing exports to countries that will use the uranium in generating electricity.

Australia has recently closed a deal to export 20,000 tons a year to China from 2010.

Russia is another major uranium producer with an estimated 15% of the world’s total resources.

It has plans to expand the contribution of nuclear power to its energy requirements to 25% by 2020.

This will require a growth in its domestic production from 3000 tonnes per annum to 16,000 tonnes per annum just to keep its own domestic demand satisfied.

This scenario does not envisage Russia as being a significant source of exported uranium now or the future.

Where to Next?

World population is rising fast and, not unreasonably, the populations of the increasingly prosperous emerging countries want to embrace the lifestyles that we have become accustomed to and enjoy in the West.

They are increasingly becoming to expect television and computers on stand by as a norm, heating when it is cold, air conditioning when it is hot, and every day use of cars and planes for travel.

It is unreasonable and illogical to expect diminishing resources of fossil fuels to provide ever increasing energy demands as the world becomes more prosperous.

It is also unreasonable and with present technology, illogical, to expect the renewable energy alternatives of wind, wave and solar power to more than scratch the surface of future, or even current, energy needs.

I only speak for myself but I can see no alternative to nuclear power plants to meet our electricity needs as a replacement for natural gas, coal and oil fired electricity generators.

The eventual development of nuclear fuels, meaning uranium, for our transport and other energy requirements is also a distinct possibility in the not too distant future.

At long last some governments are beginning to accept that global warming as a result of the dependence on burning fossil fuels is a fact.

The US is taking positive steps to encourage utilities to invest in nuclear power plants as well as renewable energy sources.

It can be expected that the more responsible countries will follow the US example with practical assistance rather than only paying ‘lip service’ to the need for clean energy.

Homework!

We are not in the business of giving investment tips, only guidance to opportunities that we think are worth investigating in depth and then making up your own mind.

Having said that we would be naïve not to recognize that any company we mention may be construed as a possible buy or short depending on how it is presented.

We will only say that it is only our opinion that uranium miners and processors are the future, whether or not there is a melt down, as some expect, in the economies of the worlds leading industrial nations.

The world is in a developing environmental crisis, and we believe that only nuclear power can avert the future problems that may overtake us.

So without prejudice here are some companies in the uranium mining and associated sector that are worth digging into.

Cameco (CCJ) the world’s largest uranium producer will see huge benefits to its balance sheet as the price of uranium rises. This also applies to the other major producers such as Energy Resources of Australia, the second largest producer.

Two companies that mine a variety of precious and base metals including gold and nickel and have some good uranium prospects are Virginia Mines Inc. (VGQ:TSX) and Altius Minerals (ALS:TSX). Both these are well worth a look.

Three London AIM listed speculative play possibilities are International Nuclear Solutions (INS), UraMin (UMN also UMN:TSX), and UrAsia Energy Ltd (AIM:UUU also TSX.V: UUU)

Areva (CEPFi. PA) is a major worldwide uranium re-cycler and nuclear plant constructor partly owned by the French government. This and other non-miners that are involved in the nuclear power industry should not be ignored.

Conclusions

Our observations draw us to conclude that there is a very bullish scenario for uranium and the nuclear power industry in general.

In addition we are of the opinion that even a world wide recession will not greatly affect our optimistic outlook as the realization of the ongoing damage being caused to our planet is becoming an overriding priority of responsible governments.

A further plus that has become evident is the willingness of the moneymen to finance construction and other development costs in mining activity.

This can be put down to the importance some governments, the US in particular, are now showing by practical support in smoothing out imbalances when there are temporary shortages, and offering utilities generous “regulatory insurance” to encourage them to develop nuclear power.

From time to time on this site we will be giving an overview of various companies in the uranium and nuclear sector which we hope will prove a useful help in drawing up your investment strategy and coming to your own conclusions if you decide to play this sector.

The following list of companies, most of which can be accessed via Google search, are involved in uranium production: –

 

List of Companies Involved In Uranium Production

Back To Top

Related Posts Plugin for WordPress, Blogger...
More on this topic (What's this?)
Uranium Keeps Booming
A Uranium ETF.. Sort OF
Uranium Prices
Read more on Uranium at Wikinvest

Category: Uranium

Leave a Reply

BullionVault