Uranium Bull Market: Only Tip of the Iceberg

In mid September, Mitchell Dong, arch investment administrator of Solios Asset Management told a account wire service, "I anticipate we are seeing the tip of the abstract of banking investors entering the concrete uranium market." At the Platts Nuclear Fuel Strategies appointment in Washington, this accomplished week, Mitchell Dong was a pit bull. Not abandoned did he yield all-encompassing addendum during the speeches, but he was first-in-line to catechism the majority of the speakers afterwards their presentations.
Clearly, whatever antecedent purchases his armamentarium or funds had made, in entering the concrete uranium and equities markets, he apparently wasn't accomplished loading up. Nearby, a leash of Greenwich, Connecticut barrier armamentarium managers agilely listened to the presentations. Later, they lunched abandoned at their table while we empiric them awash in abysmal discussions about what bets they ability abode in the uranium balderdash market.
Long-time assembly accept kept aggravating to put this balderdash bazaar into whatever ambience they could. A difficult assignment aback abounding of them endured a twenty-plus-year uranium drought, which abandoned came out of dawdling the accomplished few years. Some accepted they had about accustomed up on the area as the years anesthetized by. Now, they and anybody abroad circuitous is aggravating to amount out how to accomplish the Big Score on this amazing nuclear renaissance.
Of advance there were opposing angle on how to accord with the uranium price. Charles Peterson, an advocate at DC-based Pillsbury Winthrop Shaw Pittman LLP, hinted at a added cellophane market, acquisitive uranium ability be offered on a approaching exchange. He compared to the accessibility of added metals area traders use speculators. Later in the day, Patricia Mohr, Carnality Admiral for Economics, at Canada's Scotiabank warned the industry that if uranium were traded on a futures market, its animation ability already accept it trading at $100/pound.
Again, the uranium amount afraid abounding at the conference. Ending the HEU afraid about at the aback of the minds of account admiral apparently because abounding wondered area approaching SWU would appear from, should the Russians abolish food to U.S. utilities. Should affairs not be taken at this time, it would not abruptness us to see a super-spike in the amount of uranium which Sprott Asset Management's Kevin Bambrough has occasionally warned us about. U.S. utilities abide complacent, assured the Department of Activity will appear to the accomplishment at the endure minute. But will they?
On the alfresco adventitious we ability get insights into the circuitous and backstairs Russian mind, we cornered Andrey A. Orekhov, advisor for the Science and Technology Department at the Embassy of the Russian Federation. He briefly abounding the appointment to eavesdrop on what Ronald Lorentzen, Administrator of the Office of Policy aural the U.S. Department of Commerce, had to say at his presentation with commendations to advancing Russo-U.S. negotiations. We activated the amnion by talking about the new bearing of nuclear reactors, and brashly allurement him if he could acquaint us to Sergei Kirienko, arch of Russia's diminutive activity agency, Rosatom. Instead he referred us to a bottom ablaze for an interview.
Then, we asked him if we had been authentic in advertisement that Russia's advancing nuclear ambitions would drive the uranium amount to $100/pound. Pondering our catechism for a while, as if belief whether the amiss acknowledgment would advance to his next meal in a Russian prison, Orekhov looked off into a far bend of the allowance and responded, "Who knows?"
His catechism concisely abbreviated the aggregate thoughts of the conference. No one absolutely knows how abundant college the amount of uranium will run, whether it will ability $100/pound (and higher) and how anon it ability access at the aeon mark. As we acclaimed in an beforehand allotment of this series, Dustin Garrow remarked of a accessible run to the $80 to $100/pound level. The Florida Ability and Ablaze agent believed $52/pound was too high.
Renaissance Could Hit a Wall
Garrow fabricated an absorbing point at the alpha of his presentation, announcing, "There are now added than 400 uranium companies." The implications of his animadversion are absolute should one abeyance to appraise what he meant. Fuel Cycle Anniversary chief editor Nancy Roth addressed this in the October 3rd issue. She appear aloft the contest and revelations at the Platts conference, writing, "Several speakers mentioned austere technology and accessories deficits that are a bequest of this abeyant aeon (the uranium depression: 1980 - 2003), forth with the absence of nuclear cadre from uranium miners to nuclear engineers."
These observations bash at both sides: uranium producers and account end-users of the uranium. If the activity and accessories shortages abort to accommodate acceptable uranium for utilities, again the amount is acceptable to acceleration abundant higher. At the aforementioned time, should nuclear ability plants abort to agents up their operations, or architecture delays appulse the architecture of new reactors, a bottom abundance of supply, beneath than what has been projected, will be required.
To accomplish it abbreviate and simple: this industry is still too 'new' to apprehend all of the complications appropriate to move forward. As Ms. Roth wrote in an email to us, "I anticipate the uranium industry has a absolute chicken-and-egg botheration in reinventing itself, and I anticipate a key indicator of the severity of the botheration ability be in these assembly costs." The amount to which she was apropos was the amount appropriate to abstract uranium from the ground. In the United States, there are a scattering of in situ accretion operations. That is an bereft amount to abundantly account an boilerplate assembly amount for a mining operation.
What happens if addition bisected dozen uranium backdrop arise new mining operations? One of the hidden problems aural the uranium development area is the abridgement of authentic miners. Over the accomplished year, a few absolute U.S. uranium producers accomplished agent raids by the anew accustomed development companies. We doubtable added will yield place, as several companies move afterpiece to the abundance development stage. Raids are demography abode because of a abridgement of accomplished and authentic personnel.
Patricia Mohr brought up addition of abounding absorbing points. Increased mining achievement during 2004 and 2005, but in the aboriginal bisected of 2006 Mohr observed, "Mine assembly apparently alone in the aboriginal bisected of 2006." She believes assembly was about 20 percent of companies planned. She acicular out Australia's Ranger abundance assembly was lower because of a cyclone; Olympic Dam because of crumbling ore grades. Rugged granite, from which Namibian uranium is mined, has reportedly acquired problems at this country's Rossing mine. Mohr believes the mine's achievement could apathetic down in the additional bisected of the year.
We accept the assembly costs for abounding of the advancing projects are traveling to be greater than expected. If was the endure time a new uranium comminute was built? Not in this century. If was the endure abundant uranium drop discovered? Twenty years ago. How does a new aggregation account its start-up and operating mining and milling costs in today's dollars? Some ability accept they apperceive the answer, but we will not absolutely apperceive until the absolute assembly book takes place. And that ability be two years down the alley at the actual earliest. Factors such as those do addle the forecasters, the analysts and the industry insiders. They absolutely do not accept a authentic criterion adjoin which to accomplish an authentic evaluation. The endure time they could was during the uranium balderdash bazaar of the 1970s.
What about those 400 uranium companies? "Do you apprehend their account releases?" asked Nancy Roth. She does, we apprehend abounding of them. "Aren't a lot of of them just hype?" she inquired. We had to accede with her assessment. But in compassionate the inferior uranium companies, it is the account absolution which attracts investors to accommodate bazaar abutment for their banal prices. Some accept no absolute affairs but to abundance the banal market, as columnist and adept uranium cabal Julian Steyn already told us. Over dinner, Ms. Roth provided us with an important insight. She covers the NRC hearings for assorted companies acquisitive to move their projects forward. Those who are in fact affair with NRC aren't accomplishing so for a chargeless cruise to Washington at the amount of their shareholders, but instead to accompany their activity into the abundance development stage. Among the a lot of contempo applicants were some of our favorites, such as Uranerz Activity (AMEX: URZ), UR-Energy (TSX: URE) and Activity Metals (TSX: EMC). Addition was the abreast captivated Concentric Activity Corp.
Coincidentally, StockInterview fan Laura Stein had been emailing us to accommodated with Ralph Kettell, Arch Executive of Concentric Energy. Because of Ms. Stein's insistence, and our assay of Mr. Kettell, we met with him about his project. Aptly, he chose the Greenbelt avenue on the Baltimore-Washington Parkway. For those alien with this exit, it is the alley to NASA. As an electrical engineer, it was for NASA that Kettell advised the radio abundance (RF) allocation of the Space to Space Communications System acclimated in the architecture of the International Space Station. Kettell aswell brand to actively dabble in accustomed ability stocks, accepting been the advance broker and a administrator in AuEx Ventures.
No drifter to the uranium market, he had accounting an commodity for a ability website in 2003, proclaiming the advancing balderdash bazaar in uranium. Kettell anticipation that some of his admired banal picks, such as Strathmore Minerals - again trading for about C$0.30/share, would jump by 1000 percent. Strathmore's 2006 top was C$3.00.
Kettell had created an basis of 5 uranium stocks (there weren't 400 to accept from, aback in 2003) from which he started at a abject amount of 100. Kettel's admired stocks were Cameco Corp (NYSE: CCJ), Denison (TSX: DEN), International Uranium Corp (TSX: IUC), JNN Resources (TSX: JNR) and Strathmore Minerals (TSX: STM). He told us this accomplished spring, the amount of his basis had soared to the 3,000 akin - up 30 times from if he began tracking his admired uranium stocks. Aback then, the basis had alone to 2,200. We asked him in which administration he believed it was branch next. He responded, "I've looked at the technicals (technical analysis), and it should draft through the 3,000 akin in 2007."
By aboriginal 2007, Kettell believes his clandestine company, Concentric Energy, should be about trading. He told us he had angled up the abutment of Jim Dines, Doug Casey and added newsletter writers for his clandestine adjustment stock. Kettell said Pinetree Capital (TSX: PNP) was one academy abetment his project. His aggregation affairs to advance the Anderson uranium mine, about 75 afar northwest of Phoenix, Arizona. The acreage had produced about 33,000 pounds in the 1950s. Additional analysis by Unocal and Urangesellschaft in the backward 1970s approved acceptable affiance in the property. He told us Unocal was planning a 2,000-ton-day comminute in 1978 for a proposed accessible pit mine.
We acknowledgment this affair to accompany home a actual able point about the approaching amount of uranium. Aloft our allurement Mr. Kettell what his operating costs for the milling and mining operations at the Anderson property, he told us, "About $65/pound." At atomic he was honest. This may not be the amount akin U.S. utilities wish to apprehend about, but it ability become the attic amount for the approaching amount of uranium. Perhaps, Mr. Kundalkar, the carnality admiral from Florida Ability and Ablaze whom we mentioned during the aboriginal commodity in this series, should pay absorption to what the uranium miners are saying. We are.