Very good BRR, page-35

Catch the Uranium Rebound

Published Fri, Oct 10, 2014 | Tim Maverick, Staff Writer

A strike in the late summer gave the uranium industry a boost.
Workers protested for two weeks at the McArthur River and Key Lake operations owned by uranium mining giant Cameco (CCJ).
Though it didn’t last long, the pause in production still affected prices, since Cameco alone is responsible for 15% of global uranium production.
It also put a damper on Cameco’s stock price and the Global X Uranium ETF’s (URA) performance, considering that Cameco makes up over 22.5% of that fund.
In part because of the lack of supply caused by the strike, the price of the commodity jumped 30% this spring after a nine-year low – from $28 to $36.50 per pound.
Most would expect prices to drop again as supplies rise, but I don’t.
Some serious long-term supply concerns should keep the commodity cruising higher for the foreseeable future…
Supplies Are Looking Shady

Unfortunately, most of the world’s uranium (54%) comes from some seriously unstable regions, like Russia, Kazakhstan, Uzbekistan, and Niger.
Of course, Russia, which harvests uranium via reprocessing spent fuel and deactivated warheads, poses the biggest threat.
It’s unlikely Russia will stop supplying uranium to the West out of some sort of political tantrum. But because of the recent sanctions, Western banks are afraid to back any Russian deals.
This is sure to cut supplies.
And while Kazakhstan is the world’s largest supplier of uranium, Russia controls much of the production there through Rosatom, the state-run nuclear energy corporation.
The second supply concern stems from serious production cutbacks.
Those nine years of low uranium prices caused many producers to cut operations in order to remain financially viable.
Rio Tinto PLC (RIO), for instance, is now producing about a third of the uranium it was just two years ago.
Overall, the supply situation is bleak, especially since it looks like demand will rise.
Meeting China’s Demands

Cameco forecasts that annual uranium consumption will increase from 170 million pounds to 240 million pounds in 2023. That means a 4% rise every year. The increase will come directly from the 70 reactors currently being built by China, India, Russia, and South Korea to meet those countries’ energy demands.
And those calculations seem conservative when you consider some analysts’ projections…
Ian Hiscock of CRU Consulting, for instance, says demand will reach 340 million pounds over the next two decades, as emerging markets turn to nuclear power.
According to World Nuclear Association data, China plans to quadruple its nuclear capacity by 2020, at least. (Keep in mind China needs to get power from somewhere in light of its government’s recent decision to ban the use of low-grade, polluting coal.)
Currently, China has 30 reactors under construction, with another 100 or more planned in the next 20 years.
So how can you take advantage of the improving long-term fundamentals for uranium?
Well, you could simply purchase stocks like Cameco.
But until the price of uranium in long-term contracts with utilities – and not just the spot prices – moves upward, the stocks are unlikely to improve.
A purer play is to own Canada’s Uranium Participation Corporation (U.TO), which invests directly in uranium oxide and uranium hexafluoride concentrates. It will more closely follow the spot price of uranium as it moves higher.

And “the chase” continues,

Tim Maverick

From the Wall Street Daily link above.

;-)