Seeking Alpha

Peter Epstein's  Instablog

Peter Epstein
Send Message
In 2011 Peter Epstein, CFA, MBA left a $3 billion hedge fund where he was a senior analyst to help increase awareness of a number of small cap companies in which he's invested in. Please see: EpsteinResearch.com On TWITTER: @peterepstein2 Mr. Epstein formed MockingJay, Inc., a consultancy for... More
My company:
MockingJay, Inc.
My blog:
Epstein Research
  • China Can Not Avoid A Massive Nuclear Buildout- Energy Fuels, Inc. Poised To Soar 7 comments
    Jul 12, 2013 6:06 PM | about stocks: UUUU, BLKMF, CCJ, RIO, PALAF, ARVCF, DNN, UEC, URG, URZ, URRE
    China Can Not Avoid a Massive Nuclear Buildout- Energy Fuels, Inc. Poised to Soar


    Friday, July 12, 2013 · Posted in Uranium, Uranium Companies · by Peter Epstein

    Air pollution in China is a prime reason why China has no choice but to ramp up Nuclear power in a major way. Leaders won't necessarily come out and say it, but they will be doing it. Growth in coal consumption will slow faster than expected and Nuclear power will grow faster than expected. China will talk about renewables like wind, hydropower and solar, but China is running out of logical places to build massive dams, and wind and solar are not baseload power sources. China literally has no other choice if it wants to keep its 1.4 billion people happy. Happy, by supplying enough electricity for all to use at an affordable price, without blackouts, and happy, by substantially decreasing the intolerable levels of air pollution.

    This politically embarrassing and dangerous air pollution problem is not entirely from burning coal, it's also coming from the relatively recent addition of tens of millions of cars and trucks. China will not limit car sales, it will move towards electric cars. Therefore, millions ofnew electric cars will require even more baseload power from coal, natural gas, or Nuclear. No matter what Chinese leaders do, it will take years to greatly reduce the level of air pollution in cities like Beijing, meaning that the spotlight will be focused on ways to fix that problem. Did I mention that more Nuclear power is the only viable solution?

    Energy Fuels, Inc. is the largest uranium company in the U.S. Pro forma for the planned acquisition of Strathmore Minerals, the company will have 127 million pounds of uranium resources across several western States. The company is already producing 1.2 million pounds, about 25%-30% of ALL U.S. uranium this year. Energy Fuels also has permitted mines on standby and substantial development-stage projects that could bring annual production up to 3-4 million pounds once the long-term uranium price rebounds.

    Energy Fuels is 100% owner of White Mesa, the ONLY operating conventional uranium mill in the U.S. This mill can process up to 8 million pounds of uranium per year, giving the company 3-4 million pounds of excess toll milling capacity. Therefore, within 2-3 years, Energy Fuels could be mining and milling its own 3-4 million pounds of uranium, plus toll milling an additional 3-4 million pounds, for a total of 6-8 million pounds per year. Again, a uranium price north of $70 per pound would likely be required, but $70 is well within the range of expert estimates for 2016 and beyond. Long-term uranium price estimates from key producers, industry consultants and equity analysts range from $65-$90 per pound.

    If Energy Fuels reaches throughput of 6-8 million pounds at White Mesa, that would make it at least 2x-3x the size of any other U.S.-focused uranium company such as Uranium Energy Corp (NYSEMKT:UEC), Uranium Resources (URRE) Uranerz (NYSEMKT:URZ), or UR-Energy. With the current long-term uranium price at $57 per pound, Energy Fuels is flying under the radar, trading very cheap to peers. However, fast forward 12-18 months, Energy Fuels will be a prime takeout candidate for a company like Uranium One/ ([ARMZ]), Rio Tinto, Areva Paladin,Energy Resources of Australia and of course, Cameco.

    The last time that uranium stocks languished at depressed levels, they subsequently and suddenly staged a tremendous rally. This rally was cut short by the tragic (earthquake/tsunami) events in Japan in March, 2011. Still, at the time, Energy Fuels stock price spiked from 16 cents to 80 cents, a FIVE-Bagger! This explosive move, shared by many other uranium junior stocks as well, was driven by a mere 22% increase in the long-term uranium price.

    The following article is what got me going in the above paragraphs.

    [Mining.com] Air pollution from burning coal can significantly shorten the lives of people exposed to the particulates, according to a study of China's air quality by an MIT economist. The study predicts that some 500 million Chinese living "north of the Huai River are set to lose an aggregate 2.5 billion years of life expectancy (5 years per person) due to the extensive use of coal to power boilers for heating throughout the region."

    For people living south of the Huai, where government policies are less accommodating of coal-powered heating, the life expectancy outlook is much more positive.

    The Chinese government has recently pledged to tackle air pollution but the task is daunting: The US's 45 micrograms of particulates per cubic metre during the 1990s pales in comparison to China's more than 400 micrograms during the same period. The situation has become worse in many Chinese cities, including Beijing. Pollution levels in January of this year reached as high as 700 micrograms per cubic metre.

    Tags: AREVA, CCJ, DNN, EFR.TO, EFRFF, ERA.AX, PDN.TO, RIO, UEC, URG, URRE, URZ

    Disclosure: I am long EFRFF.PK, OTC:BLKMF.

    Themes: uranium, mining Stocks: UUUU, BLKMF, CCJ, RIO, PALAF, ARVCF, DNN, UEC, URG, URZ, URRE
Back To Peter Epstein's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (7)
Track new comments
  • Robert Hennecke
    , contributor
    Comments (649) | Send Message
     
    Over 90 % shareholder approval of Strathmore takeover and the 20 to one share consolidation proposal as well. Uranium prices may have hit bottom as it has come up about 1,25 or so a pound last week. The warheads to energy contract is unlikely to be renewed given relations with Russia. It would likely take a year to impact volumes but it can't hurt uranium prices. The Japanese economy is heating up due to Abenomics and there has to be pressure to turn on some of the reactors.
    13 Aug 2013, 09:22 PM Reply Like
  • jimwatsonnc
    , contributor
    Comments (20) | Send Message
     
    The demand arguments re. price of U mostly make sense to me....especially Japan and China. However, I am having trouble buying the idea that the end of the Russian HEU program will help with the price. First, they will still be producing fuel from it, which will affect overall world supply. Plus, the US is now ramping up its own HEU conversion program, going well beyond the 10% of US demand they were supposed to be limited to. The excuse was the end of the russian program, but as I say, it is a world market. And, if I remember right from my research, there is at least a 10 year overhang of US HEU at the present rate.
    16 Aug 2013, 03:06 PM Reply Like
  • Robert Hennecke
    , contributor
    Comments (649) | Send Message
     
    I think that this is the low point for uranium prices now.
    The Russian impact of them nor renewing the warheads program will be significant. You make a logical point of the uranium simply flooding the global market but fail to realize that they are not compelled to convert their warheads that they otherwise would have supplied to the US into actuial uranium for energy production when they have Uranium one to aquire all the uranium they need in Kazakhstan and the economics of downblending work against going in that direction simply to get yelllowcake when viewed from the perspective of the high costs of creating the warhead in the first place. It is more valueable for the Russians to retain the warheads from an economic, political and relative power value prospective. In short, they are better off keeping the warheads as warheads just in case. They signed the prior agreement when Russia was desperate for cash and was in a relitively weak position vis a vis the rest of the world....that is not the case nowadays.
    25 Aug 2013, 08:27 AM Reply Like
  • Robert Hennecke
    , contributor
    Comments (649) | Send Message
     
    Going back to my point of worsening relations: what if some of those Russian warheads that would have been converted to energy producing Uranium and instead is retained simply as they are currently, namely warheads as they feel they are living in a hostile world and need these to keep safe vis-avis both the US and the PR of Cruelty. If that were to be the case, then their urnaium supply would not be increasing the world's supply and thus my point would retain it's inherent validity. There are so many 'issues' between Russia and the west to inumerate here to realistically contemplate that they would renew the megatons to megawatts or whatever it's called program again and instead contemplate an actual reversal of that process....using actual uranium yellocake to produce Plutonium in order to make MORE warheads.
    25 Aug 2013, 08:27 AM Reply Like
  • Peter Epstein
    , contributor
    Comments (1795) | Send Message
     
    Author’s reply » I don't know how soon before the long-term uranium price of $54 starts to move higher, but it won't take a massive move above $54 to make EFR a winner. At $65, up 20%, EFR would be pretty good. At $75, EFR would be great.

     

    Back in 2010-11, the long-term U price moved up by just 22% and EFR stock was up by 400%, from 16c to 80c. In fact, it traded above $1 per share before settling back at 80c. All of this happened in a 9-10 month period. Then we had Fukushima. The long term price just prior to Fukushima was about $72-$73.

     

    I am not suggesting that EFR is going to hit 80 cents, but I think 40 cents is quite achievable next year.
    16 Aug 2013, 09:45 PM Reply Like
  • Robert Hennecke
    , contributor
    Comments (649) | Send Message
     
    Concsolidation in the uranium mining sector picking up pace. Is it due to the pressure of low uranium prices or is it an attempt to be better prepared to handle increased uranium demand ?
    27 Aug 2013, 08:06 PM Reply Like
  • Robert Hennecke
    , contributor
    Comments (649) | Send Message
     
    Cameco's Cigar Lake troubles, Japan winning the Olympic bid HAS to mean greater need for energy----nuclear ??? Megatons to megawatts soon to end === increase in spot price for uranium ?
    10 Sep 2013, 01:13 AM Reply Like
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.