NUCLEAR EXPANSION: A WORLDWIDE PHENOMENON
Yuri Sokolov, Department Head of Nuclear Energy for the United Nation's International Atomic Energy Agency (IAEA), told reporters this past week, "There is plenty of uranium assuming the industry keeps moving ahead with exploration and new mines." Sokolov is confident the "identified resources" of 4.7 million metric tons can be mined for less than $60/pound. But there was a warning buried in his speech. He cautioned that the major risk to uranium supplies would come from possible delays in moving from discovery to production. Industry insiders understand it can take between 12 and 20 years after a discovery to reach the production stage.
Sokolov also set targets in the IAEA's annual Red Book. Depending upon how quickly the nuclear industry expands, more uranium will be required. By 2025, if global nuclear capacity increases to 22 percent, utilities will need 80,000 metric tons per year. An increase to 43 percent would require 100,000 metric tons annually. The Red Book forecast new mines, over the next five years, would add about 30,000 metric tons to the supply inventories. This new capacity would fill the current uranium supply shortage. More new mines would need to come online to keep pace with the heralded nuclear renaissance. Only the most cynical industry insiders would disagree that the uranium mining sector desperately needs a dramatic surge in production between 2010 and 2020 to match the explosive growth ahead for this sector.
SUMMARY
Nuclear energy "hot talk" should also get a boost in August and September, after the North American release of James Lovelock's "Revenge of Gaia" (Basic Books). The 86-year old scientist has led the charge among the world's environmentalists to get the greens to go nuclear. The international media has sought out Dr. Lovelock's opinions. Figure we'll see the same boost in "pro nuclear" going into the autumn. As the author appears on numerous talk shows, the polls should swing more heavily into building more nuclear plants.
Russia's desire for a uranium/nuclear monopoly, hurricanes, tight supplies through the summer and the likelihood of yet another energy crisis before Labor Day could spell a significant boost in spot uranium pricing. It would not surprise us should spot uranium trade closer to $60/pound over the next 100 days. Any "shock event" could spike the spot uranium price above that level, and possibly make a run for $100/pound uranium.
Such a level would be unsustainable, of course, but it would be an eye-opener and attract renewed interest in the domestic uranium mining sector. The key domestic contenders for adding new mining capacity in the United States appear to be Strathmore Minerals (TSX: STM; Other OTC: STHJF), Uranium Resources (OTC BB: URRE), Energy Metals (TSX: EMC), UR-Energy (TSX: URE.TO), and Uranerz Energy (OTC BB: URNZ). There are others, of course, but we have not followed their developments as closely.
Should the Russians absolutely confirm there will be no HEU-2 deal, U.S. utilities will be driven to closely investigate working relationships with domestic uranium development companies for reliable nuclear fuel supplies. As for market capitalizations versus pounds-in-the-ground, during the last uranium bull market (in the 1970s), utility companies were buying uranium companies for about $5-6/pound of uranium. Some of our favorite companies, which host historically reliable and NI 43-101 compliant uranium resources over 100 million pounds, would be severely undervalued under that comparable scenario.
StockInterview's "Investing in the Great Uranium Bull Market: A Practical Investor's Guide to Uranium Stocks" debuts its e-Book edition this coming weekend. The number of investors now following developments in the uranium sector has grown exponentially over the past two years. The mad rush for data about uranium companies and industry developments has catapulted this website's traffic into the top five percent of all Internet websites. When the print edition arrives in bookstores and libraries, and is offered through book clubs and other allied groups, the demand for uranium and interest in the nuclear fuel cycle should make another leap forward.
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James Finch contributes to StockInterview.com and other publications. Visit http://www.stockinterview.com for more information. You can write to James Finch at jfinch@stockinterview.com
