Seeking Alpha
Deep value, long only, special situations, value
Profile| Send Message|
( followers)  

A few days ago the French upstaged the US mighty nuclear reactor construction industry under our very noses in broad daylight, making us appear as Homer Simpson napping at the control plant of Mr. Burns’ atomic energy plant in Springfield. Most of the media never mentioned the event. Only one gave it token coverage hidden on page A13 without realizing its true significance.

French President Nicolas Sarkozy signed a landmark deal with the Indian government to sell billions of dollars of nuclear reactors and fuel for the next 25 years, while the US is battling in hard economic times, beset by unemployment to maintain a grip on India’s extremely profitable and growing nuclear industry.

The French, Japan, Korea, and China are actively building reactors. In fact, India desires to develop nuclear electricity as a cleaner alternative to coal-based energy to satisfy the country’s increasing needs. India is on record as having about 4,560 Megawatts of nuclear power now, but wants to multiply that about 14 times by 2032.

President Sarkozy recently returned from Mumbai saying that the nuclear agreements are “very favorable to the French nuclear industry.” Moreover the French are building a state-of-the-art, new generation nuclear reactor in Finland.

The United States is constantly laboring to court India’s very profitable and blossoming nuclear energy industry. President Sarkozy has invaded the marketplace, which has been historically commanded by America. Admittedly, it is important to protect polar bear habitats, but simultaneously we should defend a sector in which we were pioneers going way back to the Manhattan Project led by Einstein, Bohr, Oppenheimer, and Meitner. These visionaries were thrown out of the “Fatherland” because they espoused a new physics that was antagonistic to the classical German rocket technology. This erroneous decision was later regretted by the Nazis as they failed in the race to build the atomic bomb.

There is another major crisis over the near term. America is one of the largest users of uranium and a lot of the uranium comes from Russia. More than 90% of uranium consumed in this country is imported. However, that program with Russia is coming to an end by the end of 2013 and the US will need to find alternate supplies. Time to wake up, Homer.

Yesterday, the Russian mining arm ARMZ purchased Mantra for almost $10 a pound of uranium in the ground. Mantra controls the Nyota deposit and will be able to produce 5 million pounds of uranium a year. This transaction signals that governments and institutional investors are scrambling for control of uranium assets in the ground. These transactions should continue over the next few months as alert foreign nations such as China and Russia are realizing the dire supply-demand constraints.

Russian uranium requirements have increased, evidenced this year by several acquisitions including Uranium One (OTC:SXRZF), which has just received its NRC license on its Moore Ranch project. Other miners in Wyoming are likely targets. The trend is signaling that the suitors will come from overseas as China, with its recent take-off agreement with Cameco (NYSE:CCJ), and Russia, with its recent purchase of Mantra, seem to be the most active investors. I'm surprised that the US seems asleep at the switch with many danger signs being alerted.

Back in October I wrote about building positions in the promising uranium mining sector, especially domestic assets and specifically assets found in Wyoming. Wyoming is a mining-friendly jurisdiction and there are a lot of miners nearing production.

(Click to enlarge)

Some of the miners out of Wyoming nearing production have made huge percentage gains, such as Uranerz (NYSEMKT:URZ), UR Energy (NYSEMKT:URG), Cameco, and Uranium One, as more mines are expected to receive permits to begin operation.

Disclosure: Author long URG

Source: Is America Falling Asleep at the Switch With Uranium?