Uranium Producers: Worth a Look

Jerry Grandey, CEO of Cameco (CCJ), made some interesting comments concerning the long term uranium supply/demand balance at the Reuters Global Mining and Steel summit held in New York.

He said that the current lack of uranium supply expansion in the face of the current financial system difficulties coupled with the uncertainty of how Russia will react after the current Megatons to Megawatts deal expires in 2013 is setting up the uranium market for a future supply crunch. He was quoted as saying, “I think the financial crisis is clearly impacting the ability of every supplier to raise capital,” according to Reuters. “When you see project cancellations, you see expansion derail, you see some projects that will just go slower. That is just simply taking away future supply and sowing the seeds of the next spike in the uranium price.”

The current supply of uranium from mines is 115 million pounds per year against a demand of around 180 million pounds per year. Grandey said he expected demand to increase about 2-3% per year.

The deficit between supply and demand has been made up by decommissioning and downblend nuclear warhead material, primarily Russian warheads, under the Megatons to Megawatts program. This program is supposed to end in 2013 and the Russian atomic company Rosatom has been on the record that it does not intend to continue the program after 2013 as it has not been advantageous to Russia. This would be consistent for Russia as it has viewed full control and use of its resources as a cornerstone to a return to superpower status. The blueprint on how they would proceed can be seen by watching how they deal with their current oil and natural gas customers.

The current uranium price of $43.75 per pound is currently insufficient to stimulate sufficient new mine development in a timely enough manner to close the supply/demand gap. Although Cameco has had various problems lately that have impaired the stock price, especially around its Cigar Lake mine, the company still is the 800lb. gorilla in the uranium market. Smaller producers such as Paladin Resources (PALAF.PK), which is in the process of doubling its uranium output and even Uranium One (SXRZF.PK), which appears to be stabilizing itself after its debacle at its South African uranium mine appear to be worth a look for the long term.

Stock position: Long CCJ, SXRZF.PK, PALAF.PK.

Comments

[optionsgirl:]

Thorium has great promise, too.

Mar 13 10:29 AM

[MikeyLV:]

URG will begin producing in 2010 as well and has plenty of cash.

Mar 13 12:02 PM

[oldmaninPA:]

I like URRE although it's certainly a spec play

Mar 13 01:03 PM

[balois:]

Statement

“…deficit between supply and demand has been made up by decommissioning and downblend nuclear warhead material…”

What about Mox from recycled, reprocessed spent fuel?

Unless I am mistaken, in 2007, latest data I found, there is/was an inventory of around 240 Million pounds equivalent U from reprocessed fuel alone or l,3 times annual demand for U.
(OECD/NEA 2007, www.world-nuclear.org/... )

World leader Mox recycling is Areva (quote: CEI, Exchange: Paris)

Have a good day

Mar 13 01:03 PM

[Jay Currie:]

Take a look at Canadian Uranium producers over at stockresearchportal.co...

The Canadians have the advantage of a significant resource base and the relatively cheap Canadian dollar. Plus, and this may be very important, next to no chance that the industry will be nationalized.

Mar 13 02:14 PM

[Conan the B...:]

Part of Uranium's alure had been the expectation that the US would increase the number of Reactors. That expectation no longer holds true. Obama has halted the expansion of the Yucca mountain holding tank.

Uranium prices have slipped from $48 to $43.75 since that announcement.

Optionsgirl: You continue to surprise. THPW, The use of thorium power in plants is gaining a following in Russia.

Any other Technological inovations in the Alt. A arena?

Mar 14 05:56 AM

[Hari Seldon:]

Obama is going to announce soon that the reprocessing ban will be lifted. I haven't done the math in terms of what this means for global demand but it can't be good for the miners. That said, it is a huge step in the right direction from a policy standpoint.

I'm a big fan of nuclear energy and wish (a) uneducated "environmentalists" would stop the irrational bashing and (b) some more politicians step up and start advocating for new nuclear plants in the US. Of all the methods to produce a stable and clean supply of energy, nuclear is far above the competition.

Mar 14 03:33 PM

[Conan the B...:]

Hari Seldon: the Foundation series. I was a big fan.

Europe is a big fan of Nuc reactors, even the French population ignores the reactors in their midst. I read somewhere that 85% of France's energy needs are Reactor supplied.

The Fear in our case may be more of a Fear of the Sitting Target that a Reactor poses.

I tend to have that fear myself since I live within 25 miles of same. Before 9/11, I did not have that qualm, now I do.

Mar 15 10:05 PM

[optionsgirl:]

Google Nuclear Engineering International. There are lot's of great articles you can read for free. It's much better than to get your information from the talking heads on TV or the investment gurus! Some of my other favorite sites: meatandpoultry.com,
OilVoice, Hard Assets Investor, and the Jerusalem Post Magazine ( that isn't free) which always features some Israeli breakthrough but doesn't usually turn into a viable investment, and WaterWorld Industrial for water infrastructure information.


On Mar 14 05:56 AM paultaut wrote:

> Part of Uranium's alure had been the expectation that the US would
> increase the number of Reactors. That expectation no longer holds
> true. Obama has halted the expansion of the Yucca mountain holding
> tank.
>
> Uranium prices have slipped from $48 to $43.75 since that announcement.
>
>
> Optionsgirl: You continue to surprise. THPW, The use of thorium power
> in plants is gaining a following in Russia.
>
> Any other Technological inovations in the Alt. A arena?
>

Mar 16 07:07 PM

[optionsgirl:]

From US News and World Report, Oct 2008:

"Could thorium be the solution? Some politicians and businesses hope so. Earlier this month, Nevada Sen. Harry Reid and Utah Sen. Orrin Hatch introduced a bill that would set aside $250 million for research and development of thorium fuels."

I wonder whether that is why Obama killed Yucca Mountain? Just a thought... it sure is big in India.


On Mar 14 05:56 AM paultaut wrote:

> Part of Uranium's alure had been the expectation that the US would
> increase the number of Reactors. That expectation no longer holds
> true. Obama has halted the expansion of the Yucca mountain holding
> tank.
>
> Uranium prices have slipped from $48 to $43.75 since that announcement.
>
>
> Optionsgirl: You continue to surprise. THPW, The use of thorium power
> in plants is gaining a following in Russia.
>
> Any other Technological inovations in the Alt. A arena?
>

Mar 16 07:15 PM