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China Nuclear To Conduct IPO

|Includes:CCJ, Global X Uranium ETF (URA), URPTF

Reuters:

China National Nuclear Power Co Ltd plans to raise 16.3 billion yuan ($2.60 billion) in the industry's first initial public offering, as part of the world's biggest expansion of civilian nuclear power capacity.

The listing, if approved by the securities regulator, could be the largest on the mainland since Agricultural Bank of China Ltd in July 2010 - though Guotai Junan Securities Co Ltd could take that accolade after applying for an IPO to raise 22 billion yuan, based on Reuters calculations.

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The listing would be part of the government's drive toward cleaner energy, under which it aims for installed nuclear power capacity of 58 gigawatts (GW) by 2020 from 14.6 GW in 2013, rising to 200 GW by 2030 - a goal analysts labelled ambitious.

Expansion was suspended after the 2011 nuclear disaster at Fukushima, Japan, but plant construction is widely expected to resume in coming months.

My view on uranium is the same it has been, it is a long term buy. The current price of uranium is not sustainable as it is below the what is required to provide an adequate return on capital. At many mines the current price is below the cost of production. In addition no one is going to put capital into new mines until the price rises to a sufficient level (and stays there for a while) to provide a decent return on capital. The longer the price stays down the longer and further the ensuing bull market will be. This info from China is just another clue that the demand for nuclear power is not dead and is expanding worldwide. Patience is required but this is a similar setup to buying gold back in 1999. It took patience and conviction to accumulate but in the end it paid off. The uranium price rise is a when event not an if event. Either the price of uranium goes up or nuclear plants will eventually shutdown.

Disclosure: I am long URA, CCJ, URPTF.

Stocks: URA, CCJ, URPTF