When I met a friend from Cape Town, South Africa the other week, he spoke about how BHP (BHP) is instrumental in that nation's mining industry. I met Australians, Chilean investors and even some from Mongolia who spoke about BHP and its versatility. BHP perhaps has mining and exploration activities in all the continents of the world. BHP is not just a metal extraction or a mining company, but is also engaged in oil and gas exploration in countries that you didn't know existed. With such versatility, one can expect ups and downs every other day.
In fact, a close look at the headlines would reveal both positive and negative aspects of BHP, as is expected from a company that large. The globalORE electronic trading platform is backed by BHP Billiton, and will help in trading physical iron ore cargoes. The platform has been discussed and spoken about for a long time, but will finally be launched in the next 2 or 3 weeks. If that didn't add to the excitement, BHP revealed that its Stainless Steel Materials and Aluminum Customer Sector Groups will be merged into a single CSG. This speaks a lot about the company's quest to bring order and discipline into its own versatile functioning.
BHP boss Marius Kloppers announced that the company would spend conservatively, which is always a good thing when we consider all the risks that the company is already taking. However, I do believe the company would be in an even more advantageous position if it decides to be more proactive about uranium exploration across the world. I would specifically like BHP to consider exploring uranium in Canada.
Canada isn't the first country that comes to mind when we speak about energy and fuel. However, the northern nation produces about 20% of the world's uranium and exports 80% of what it produces. Canada has very strict laws about who gets to buy this uranium and how it is used. Saskatchewan has some of the world's largest uranium mines and large deposits of potash. It was recently announced that Canada struck a deal with China with respect to uranium production. Cameco (CCJ) is expected to deliver 52 million pounds of uranium to China by 2025 and the contract is worth a whopping $2.5 billion.
CanAlaska (CVV) reported that there are very strong geophysical responses within its target areas during its exploration for uranium in Manitoba. With Manitoba not far behind Saskatchewan, Canada surely has to be one of the most important destinations for companies to explore alternative sources of energy.
Asian countries, such as China and India, have been looking for alternative sources of energy, and uranium is the most preferred method of lighting up their nations. With that in mind, Canada is one of the most lucrative destinations for foreign companies that seek to explore uranium. In fact, Canada's Athabasca Basin could turn out to be North America's very own energy rich zone.
BHP is not a novice in this area, and considering its versatility and diverse interests, it has already considered reaping the benefits of Canada's uranium reserves. Though the company maintains that it tries to spend conservatively, it announced way back in 2012 that it is interested in Canada's uranium resources. While BHP has indicated that it is basically a metal mining company, that revelation has not stopped it from exploring uranium and considering diversifying in that area as well. It would be truly advantageous for BHP to follow its initial dreams of reaping the benefits of Canadian uranium reserves. Rio Tinto (RIO) has already expressed its desire to extract uranium in Canada and may probably offer to purchase Denison Mines (DNN) as well.
Uranium is probably the most controversial element to be mined, and for very right reasons. Countries such as Iran and North Korea have misused their access to uranium, and that has led to very grave political and military situations. With that in mind, companies that deal with uranium mining have to be extra cautious about their dealings. Nevertheless, it is important to note that global energy demands have risen sharply and with oil reserves becoming smaller with each passing day, uranium seems to be the only green and safe option for us to choose. Uranium is not only used for energy purposes, but also to manufacture isotopes that are used in the treatment of cancer. Thus, the demand for uranium is going to increase substantially, and those companies that are involved in uranium mining will benefit a lot in the next few years.
BHP is a venerable company that knows where to spend its money. It not only invested money in iron ore operations at Port Hedland, but also agreed to cover up $50 million of the expenses of the next planned exploration drill of Woodside Petroleum. BHP has been very proactive in maintaining mines and engaging in exploration activities in countries such as Mongolia, where very few companies have entered.
With a number of options and choices, BHP is in a very strong position to make decisions and be a little adventurous as well. In my opinion, BHP has a lot to gain if it decides to begin exploring for uranium reserves in Canada. It must indeed be more proactive in terms of uranium exploration and purchasing companies that already have their own mines. Canadian uranium reserves are something that I believe will help BHP to consolidate its status as the most versatile mining and exploration company in the world.
Regardless of the political situation today, BHP should go ahead and engage in uranium exploration along with other substances. This would help BHP to consolidate its already vibrant mining and exploration portfolio, which most companies today can't boast of.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.