By Jeb Handwerger
How did the world champion chess players take over prime mining land in Wyoming and Texas in a brilliant tactical maneuver? Well, who would’ve thought it? Broad daylight and without a shot being fired, Russians have taken possession of rich American uranium assets. How they managed to do this might require the skills of a Sherlock Holmes in unraveling a labyrinthian maze. A description of the end game follows: About a year ago, the directors of Uranium One listed on the Toronto Stock Exchange as UUU and on the Nasdaq as SXRZF were abruptly informed by the Kazakhstan Government that their uranium properties were to be expropriated. The directors immediately flew out to the capital for an emergency meeting. What emerged was a deal. Uranium One would be given two Kazakh Uranium mines plus a special sweetener dividend of $1.06 a share if they would sell a 52.14% ownership in the company to an entity known as ARMZ. Upon investigation it turns out that ARMZ is a private company completely in the control of the Russian Federation. Now Uranium One owns mines in Wyoming and Texas. In one brilliant move the Russian Government is the new cowboy in Wyoming and Texas. As a result of this coup, Moscow (ARMZ) has swiftly and brilliantly entered the U.S. through its control of Uranium One, without a shot being fired. The citizens of Wyoming took the case to the Wyoming Supreme Court and all the way up to the President, Geithner and the Nuclear Regulatory Commission. They were concerned that Russia would control 20% of vital American uranium. Moreover, they feared that somehow U.S. uranium would wind up in Iran’s nuclear reactors. They were defeated. Now in Wyoming be prepared to translate your “Howdy” into “Pri-vet”.
The gambit becomes clearer when one realizes that UUU is the fifth largest uranium company in the world offering investors a huge leverage to spot uranium prices relative to its closest peers such as Cameco(CCJ:NYSE) and Denison Mines (AMEX:DNN). Uranium One production is expected to grow substantially over the next five years. Now it so happens that in addition to the owning of prime uranium properties around the world, Uranium One most recently made a lucrative offer for Mantra Resources in Tanzania. ARMZ (The Russian Federation) is on record that they intend to become the world’s second largest uranium miner within three to five years.
In October, I listed the uranium miners close to production in Wyoming. For whom The Nuclear Regulatory Commission has issued draft licenses to three major uranium developers, Uranium One (SXRZF:NASDAQ), Ur Energy (AMEX:URG) and Uranerz (AMEX:URZ). Many of these shares have already seen huge gains since that article.
It doesn’t take a Sherlock Holmes to realize the demand from emerging economies who are rapidly developing nuclear reactors. There is a supply fear as Russia will not renew its agreement to supply the US with converted uranium from nuclear weapons. For years the U.S. relied on this cheap uranium as Russia was the major supplier. Now all eyes are on these domestic uranium miners as this agreement terminates.
It is important to follow the countries which have a trade surplus like Russia and China and to highlight the locations of their strategic investments. They are willing to pay premium prices to acquire new uranium assets. One should follow those mines which have not yet been acquired and have the best production profile. Even though China is bailing out Europe and the U.S. deficits by purchasing debt, behind closed doors and below the radar of the mainstream media, China and Russia have been purchasing major amounts of uranium as prices have recently soared. I don’t believe this demand that has pushed the price higher of uranium oxide is coming from major utilities alone, but from the many new reactors being constructed now in India, China, France, Russia and many other emerging economies. This price increase has a direct effect on the value of these uranium producers and investors may be in for an exciting 2011 in this sector which protects investors against a dollar devaluation and provides upside on the growing energy demand of emerging economies.
Uranium miners that have received their draft licenses in Wyoming have been rising in the past three months as major investors realize the value in these key projects. These stocks have been gaining a lot of enthusiastic interest from investors over the past few weeks. Some of the miners out of Wyoming have made huge percentage gains such as Uranerz (URZ), UR Energy (URG), Cameco (CCJ) and Uranium One (OTC:SXRZF) as these mines move closer to producing uranium ore. Expect to hear more news of acquisitions and strategic investments as these uranium miners move closer to production.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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