Pure Energy: Uranium's Explosive ProfitsThursday, July 13,...

Pure Energy: Uranium's Explosive Profits
Thursday, July 13, 2006
By Michael Schaefer

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Russians could send 'yellow cake' prices soaring
Believe it or not -- tomorrow, July 14th, Russian President Vladimir Putin is going to drop a hellacious bomb on the uranium market. And the damage the Russians are about to do could be far worse than anything the Iranians or North Koreans could slap together.

Here's what I mean…

Tomorrow, the Russians will make their most aggressive nuclear play in decades, when world leaders assemble in St. Petersburg, Russia for the G8 Summit. At this meeting, President Putin will put an end to a deal they made over a decade ago with the U.S. This agreement has allows American companies to buy uranium at basement level prices.

How's that?

Well I'll tell ya…it started at the end of the Cold War, in 1991, with the break-up of Russia into its constituent republics. Four decades of stock-piling nukes came to an end. Two years later, the United States and Russia signed what is known as the U.S.-Russian HEU (highly enriched uranium) Agreement.

Under the terms of this agreement, Russia promised to supply U.S. companies with highly-enriched uranium, recycled from old Soviet nuclear warheads -- sort of a 'megatons to megawatts' program.

The agreement called for the delivery of 500 metric tons of highly-enriched uranium over the 20-year life of the agreement. (By the way…500 metric tons of highly-enriched uranium is the equivalent to 20,000 nuclear warheads)

So far, U.S. companies have taken delivery and used 275 metric tons of the Russian weapons grade uranium. But now that President Putin plans to cut the agreement short, U.S. companies will lose out on the remaining 225 metric tons.

This uranium -- having the energy equivalency of 4.7 Billion barrels of oil -- is extremely important to the sustainability of nuclear power in the United States. Why? Because roughly half of the supply of uranium at U.S. reactors comes from this agreement.

So why the heck are the Russians pulling the plug anyway?

Why else. -- Money!

The Russians are furious because the HEU Agreement allows U.S. companies to buy the uranium at a fixed price. During the year the agreement was sign --1993 -- uranium was selling for less than $10 a pound. Today, the energy metal sells for more than 350% higher.

And here's the thing: uranium is still selling for rock-bottom prices. At last look Uranium was selling for $45.50/pound. Think about how cheap that is for a second… 45 bucks is about what you'd pay for two cases of decent beer. But today's uranium levels aren't going got last long, no way. Everything I've studied points to higher uranium levels and I think prices could increase drastically - and so do the Russians. We'll talk about how high I think uranium prices could go in just a sec. Back to the Russians.

Now, Putin's decision to play hardball with the United States is not only about getting a fair price for his country's uranium. The Russian President is much smarter than that. Putin and his energy experts clearly recognize that uranium is on the verge of a historic bull market. So he's taking measured steps in order to position his country perfectly. In fact, according to the Moscow Times…on June 9th, Putin took a dramatic first step toward nationalizing his country's uranium market when he approved "a plan to gather all civilian nuclear sector enterprises into a single, market-driven corporation along the lines of France's Areva or Germany's Urenco."

Then on June 28th, Russian nuclear energy chief Sergei Kiriyenko announced that all uranium exploration and mining assets -- both in Russia and in the Commonwealth of Independent States -- will be combined into a single, state-owned enterprise. No private investment will be allowed.

Next up...the July 14-17, G8 Summit in St. Petersburg. So, after nationalizing his country's uranium assets, Putin will tear up the agreement to provide cheap uranium to the United States...and send uranium prices soaring. Putin's goal is clear -- he wants to dominate the uranium market.

Want more proof? ... Kiriyenko himself said that Russia would like to "develop uranium deposits anywhere in the world where it is profitable to do so." (Moscow Times, June 29, 2006.)

Now listen -- just because uranium prices have shot up more than 300% over the past three years doesn't mean prices won't have much more room to go. Take a look at how they've already skyrocketed:



Like I mentioned earlier…uranium prices are discounted 88% from their inflation adjusted high of nearly $400 set back in 1976. That means the energy metal could still increase 10 times from its current level.

Let me say that again -- Uranium Prices Could Increase 10 Times Higher than they are today!

And tomorrow when Putin yanks 225 metric tons off the U.S. market, it might be the catalyst that sends uranium prices flying -- maybe even to $100 a pound or more before the end of the year.

So why should you care about all this?

Well, it's like Gordon Gecko said in Wall Street, "The most valuable commodity I know of is information." … And this uranium information will make smart investors a lot of cash.

The actions that'll be taken by Putin tomorrow -- along with the basic fundamentals in the market -- virtually guarantee that there are more profits to be made over the next five years than over the last five.

Now, we just talked about how massive those gains have been over the last few years. So, why will uranium stocks keep climbing higher in the second half of the decade? Well, it all boils down to four, very simple reasons:


Russia plans to send the uranium prices soaring. As I've already mentioned, the Russians have every intention of putting an end to the sweetheart deal the U.S. has enjoyed for years...and when they do, the price of uranium will explode, virtually overnight.

We're in the middle of a historic energy crisis. Worldwide demand is soaring, yet our energy supplies are beginning to dry up.
Like him or not, President Bush said it himself during his State of the Union address: "To change how we power our homes and offices, we will invest more in zero-emission coal-fired plants; revolutionary solar and wind technologies; and clean, safe nuclear energy."


The supply vs. demand story for uranium is one of the most favorable I've ever seen. In 2005, the shortfall was enormous -- only 100 million pounds of uranium were produced, but consumption was over 200 million pounds worldwide. And with nearly 100 new nuclear power plants either under construction or being designed, this gap between supply and demand will continue to grow.

And last, but not least...the memories of the Three Mile Island disaster have finally begun to fade. After all, Three Mile Island happened more than a quarter of a century ago, nearly 27 years to be exact...all the way back to 1979.
Look -- there's a reason we don't hang onto things from the late 1970s anymore. There's a reason disco music (thankfully) isn't played on the radio. There's a reason people aren't still wearing bell-bottom pants. And there's a reason people don't hold rallies against the idea of nuclear power anymore. It's because time marches on.

Over the past 25 years, technological advances and regulations have made this industry remarkably safe. Yet a number of myths remain... And I think it's time to debunk the myths about nuclear power.


Cheers

Xan

IMHO DYOR