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Probably one of the most out of favor (hated ?) groups in today’s market with enough hair to
hide a gorilla is the uraniums. The Japanese debacle- the earthquake and subsequent Fukushima
disasters- has withdrawn nuclear energy in many lands as a viable energy option.
Uranium prices have seen a steady decline from a 2011 high of $75 to a recent low
of $34. Germany, Sweden, Switzerland among others have indicated a dramatic distaste
for atomic energy.
But surprisingly most other countries have remained committed or in some cases silent
for now. It is important to note that there have been no deaths or radiation sickness
from Fukushima. Nuclear power remains one of the safest means of power production!
China –the stalking horse for nuclear power- has really not wavered in its
desire to continue to expand nuclear power plants. One estimate has China accounting for over
50% of 2013-2020 currently anticipated worldwide uranium demand . India also feels this is one
of their main solutions to energy independence. Pakistan and other Arab countries also are in the
planning stage to add nuclear power. Pakistan in early 2014 said that it was in talks with China
to purchase three large reactors for about $13 billion dollars- and that would be in addition
to last year’s agreement for China to build two nuclear plants in Karachi.
And surprise, surprise the Japanese government is becoming nuclear friendly once again with
permission to restart 17 or so nuclear plants out of 50 idled reactors- with 10 expected to go on
line in this summer. Historically, Japan used to get 30% of its power from nuclear and now
all it gets is a huge oil import bill. The ruling part appears determined to put these reactors back
A nuclear power census discloses just under 500 reactors worldwide planned or proposed-
with over 150 in China, and another 130 or so in India, USSR. United States and eastern Europe.
Cameco recently reported that 37 new reactors are under construction in China and India and
further anticipates an additional 70 new reactors over the next decade.
Current global U308 supply is estimated at 140 million pounds compared to 160 million pounds
on the demand side. The demand deficit has been met by Russian sales from its military stores-
a source of supply that has stopped as of 2014. With the conclusion of the US-Russian Megatons
to Megawatts program, about 20+ million of decommissioned uranium supply from Russian
warheads disappears-leaving supply –demand in balance. Obviously any new contracts as prices
firm will create a sellers market!
As to investment potential, James Hunt of Tocqueville International Value Fund
commented-“The uranium price went below the marginal cost of production (which is) a good
time to get involved in any commodity”.
There are many ways to play the coming uranium price increase. Foremost of course
would be the industry leader Cameco (CCJ). Others in no important order would include
Denison Mines (DML), UR Energy(URG)- a favorite of ours and past recommendation , and
Energy Fuels (EFR.Toronto). At this time since the macro call is so significant, we are opting to
go with an ETF- Global X Uranium which trades on the NYSE\ARCA with the symbol URA.
URA holdings include 24 uraniums with Cameco commanding 23% of the ETF, followed
with Uranium Participation Corp (U.Toronto) at 10.2% and Denison Mines with 10%.
Assets about $150 million with 60% in Canadian securities, 20% Australia and the balance
11% in the US. The expense ratio is 0.69%.
program with supply demand now in balance. Expected any new Uranium contracts
should start prices up again.
2.Restart of Japanese nuclear reactors this summer.
3.New mines can take 5+ years to plan and build.
4.Consistent worldwide additions to build nuclear plants
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