http://seekingalpha.com/article/1892371-2014-to-be-uraniums-big-b...

http://seekingalpha.com/article/1892371-2014-to-be-uraniums-big-breakout-year?source=email_mac_com_3_20&ifp=0

AN EXCEPRT:-



Spot U3O8 Is Turning Higher-Uranium Miners May Lead Next Year

Several recent mining reports highlight that investor interest in uranium is noticeably building. This is starting to translate into slightly higher-highs and higher-lows with regular up-ticks that may be signalling U3O8 bottomed back in August at around US$34/lb. U3O8 is still only $34.75/lb. today, down $1.50/lb. over the past two weeks after three weeks in a row of increases.

Last year we thought uranium put in its bottom at $40/lb. going into Japan's December elections, which resulted in a new pro-nuclear government. The spot price did pop around 15% then, but didn't hold. If $34/lb. holds as U3O8's bottom this time then we were off by only a little; so let's just defer to agreeing with those analysts now expecting 2014 to be Uranium's Big Breakout Year.

Some of this renewed technical interest may be seasonal, in anticipation of spot uranium market trends that tend to move up during the first quarter. Demand is higher early in the year as utilities, governments and other buyers are on new budget cycles. However it is strong fundamentals that have only strengthened in the wake of Fukushima's uranium market fallout that we continue to focus on.

U3O8 demand is driven by nuclear power reactors-as of December 1 this includes 434 operable, 71 under construction, 173 planned and 314 proposed worldwide. There are also thousands of science and medical research reactors, plus hundreds of nuclear powered military vehicles such as submarines and aircraft carriers. More nuclear power reactors are in the works today than even before Fukushima!

Current uranium demand already exceeds mine production, and future supplies have no chance of keeping up unless prices at least double. More anticipated major mine expansions are now on hold due to low prices, from Kazatomprom and ARMZ recently-two of the world's three largest uranium producers. The 20-year U.S./Russian HEU Agreement to down-blend uranium from nuclear warheads into fuel just ended-no longer providing ~24Mlbs. per year that made up most of the U.S.' shortfall.

How did uranium prices get this low if the fundamentals are so strong? Simply because markets can overreact on both the upside and downside. Psychological greed and fear of the unknown move investors to ignore even obvious facts and make rash investment decisions. This NY Times article, Fear vs. Radiation: The Mismatch, discusses nuclear fears that simply don't match the facts outlined.

Prior to Fukushima uranium mining stocks outperformed, but have been decimated since. I liken this to a pendulum moving far beyond fair value and about to swing back, or to a stretched elastic band that's about to snap back. U3O8 has been prone to price spikes-$10/lb. in 2003 to $137/lb. in 2007.

On top of all these uranium catalysts, Japan's 50 operable nuclear power reactors need to be restarted to lower its $75B/year fuel bill, which has doubled and has caused trade deficits since Fukushima. No nuclear power has also meant more pollution and likely more blackouts during the cold of winter. Pending restarts of 14 reactors were recently submitted to the Japanese Nuclear Regulation Authority.

So has the post Fukushima U3O8 falling knife finally become a safe bet, maybe even a trampoline?