Investment Guide|Precious Metal Investment Expert » nuclear industry

The Factors In Favor Of Investing In Uranium

PreciousMetalInvestment.com — Thu, 15 Jul 2010 17:35:26 +0000

The last few days has seen an awakening amongst many of the financial gurus of the virtues of investing in Uranium producers and we must admit that the factors in favor make a convincing case.

In fact many of these plus points have been made in previous posts featuring uranium on this site over the last two years or more and yet the spot price of the yellow cake has stayed moribund in the $35-$40 a pound range since falling from over $135 a lb in July 2007.

In the course of this time no justifiable reason has been evident for this drop and subsequent stagnation of the price until the present time.

We understand that the current situation is that the demand for uranium to power the world’s nuclear plants is just about being met by the producers together with a rapidly diminishing source from decommissioned nuclear weapons.

The low spot price has taken many of the potential producers and exploration companies that mushroomed when prices were high out of the equation leaving only around ten established producers accounting for the majority of present supply. There are about thirty small miners making up the balance.

Bearing in mind that production costs have to be under $50 a pound to be profitable no new mining operation has been started and given the lead-time of at least eighteen months to be up and producing, there is clearly a chance of a situation where a shortfall may occur.

We should make clear that the overwhelming majority of mined uranium is sold as forward contracts where the price can be up to around $60 a lb., clearly not an option for a start up miner.

The Chinese are reported to be stockpiling up to twice the annual amount they currently need as their target is a further 60 nuclear reactors up and running by 2020. Further fresh demand can be expected from other countries committed to building new nuclear reactors with India in the lead.

Although there is no shortage of uranium (oxide) waiting to be extracted, much of it is located in politically risky regions, but as has been the case with oil, this is likely to be no more than a hiccup if demand and price warrant the expenditure and risk.

Cameco Corp (CCJ) is the blue chip of Uranium producers and should be the principal beneficiary in terms of price should the market gurus prove correct.

Market Vectors Nuclear Energy ETF (NLR) gives investors exposure to a worldwide group of publicly traded companies in the nuclear industry and is a good entry into the sector on the ‘not all the eggs in one basket’ principal.

A word of warning, all these plus points have been in the public domain for a long time, we remember writing about the diminishing source of uranium from nuclear warheads nearly three years ago and yet, today, there is still availability.

We ourselves are long term holders of both CCJ and NLR but have resigned ourselves to tucking them away in a bottom drawer, not discarded but still hopeful that they will recover to at least mid 2007 prices.

That the nuclear industry and uranium producers will eventually turn up trumps we think is a good odds – on bet. In the meantime we suspect, as so often happens when the tipsters, market advisors and gurus unite and are in full cry the price will rise and then within a week or so when the dust has settled fall back to below the price that they started before being talked up.

We suggest that leave this sector for a couple of weeks, let things settle down and then may be a good time to pick up some stock for the long haul. While you are waiting, due diligence, meaning lots of research, would be a good idea. Who knows, you may pick out an obscure uranium miner ripe for take over when the nuclear market takes off.

Precious Metals Underlying Strength

PreciousMetalInvestment.com — Fri, 26 Feb 2010 17:10:40 +0000

Despite stock markets looking increasingly fragile as the dawning realization by investors that the underlying problems of unemployment and weak housing have not been placated by quantative easing (aka money printing), gold, silver, platinum etc. have shown their underlying strength as the recession looks set to continue.

All the hyperbole produced by the mouthpieces of the US and other Western governments that the worst is over is not convincing Joe Public who is rapidly losing faith in our great leader, President Obama.

Signs that inflation is getting a grip are becoming more evident although a strong argument can be made that this may turn out to be temporary for the time being.

A miracle of fiscal probity will have to occur if eventual hyperinflation is to be avoided, and who among our politicians and their advisors has shown any indication that they are capable of tackling such a vote losing task?

The dollar had a respite from its recent popularity as a preferred currency to the stricken Euro and an even worse scenario to come for the British pound. This, together with all the other usual factors gave our precious metals a small boost as the S&P, Dow and European markets faded for a second day.

Still hanging over the gold market, and its close ally, silver, is the 191 tonnes being sold by the IMF. We would probably have seen significant gains yesterday if that package had been sold off. As an aside interesting to note that the IMF have decided to sell on the open market, unlike the previous disposal of 200 tonnes.

Could this be bowing to the Feds who basically control the IMF, in a bid to undermine the market price? If so last Friday’s option expiry date did a far better job!

Right now seems a good time to stay out or get out of all stocks and shares with the exception of precious metals and their producers. However we reiterate our warning concerning platinum.

We pass on an observation made by the CEO of Stillwater Mining to the effect that platinum (circa $1500 an oz.) and palladium (circa $420 an oz) were becoming interchangeable in their principal use as catalysts in exhaust systems and as a result the difference in their price would decrease perhaps by as much as half.

Guess which way the price of platinum will go if, as seems a distinct possibility by some commentators, the Chinese bubble bursts.

We have held on to our shares in Coeur D`Alene mines for over two years with an occasional indulgence in a little averaging in order not too lose faith. The Company has just announced that they mined 47% more silver and 56% more gold in 2009 than 2008 but managed to make a $31.9 million loss against a loss of only $ 600,000 in 2008.

Now is that a matter of bad stewardship, over commitment to exploration and development, bad luck or do they just despise their shareholders interests. We will stick with our holding for the time being and try to work out what is going on and, if we are encouraged, we will pass on the good news.
We hope that our followers took note of our earlier comments concerning the renaissance of the nuclear industry. An upbeat statement by the CEO of Cameco, one of the worlds` largest uranium producers where it is planned to double output to meet expected demand from up to 50 new nuclear plants due on stream by 2015 and many more in the pipeline from China, India and South Korea.

Even Obama has managed to get his head around the necessity for nuclear power, closely followed by Prime Minister Brown of the UK who has never had a constructive original thought of his own but is a past master at both taking credit from others or passing on blame.
We urge you to investigate the resurgence of the nuclear industry and its profit potential in these increasingly problematical times for the average investor, and as always, have faith in gold for asset safety and silver for an eventual bonanza.

The Factors In Favor Of Investing In Uranium

Investment Guide|Precious Metal Investment Expert » nuclear industry

The Factors In Favor Of Investing In Uranium

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