china is buying up uranium

China Is Buying Up Uranium
March 18th, 2014

Headlines about a Chinese economic slowdown may get good web traffic, but the real story is that China is buying up uranium and other resources around the world, says Gold Stock Trades writer Jeb Handwerger. Meanwhile, tensions in Russia highlight the massive country’s resource dominance in natural gas, oil, uranium, platinum group metals, rare earths and nickel. Handwerger tells The Mining Report that North America is already acting to develop resources that can meet both domestic and international demand—and this global geopolitical uncertainty is an investment opportunity.

The Mining Report: Jeb, how will the companies you follow be affected by the crisis in the Ukraine and the growing tensions in East Asia over China’s claims on islands held by Japan and the Philippines?

Jeb Handwerger: This is really all about natural resources and the ability to control the trade. There’s a whole list of 10 to 15 strategic minerals that come from China almost exclusively. Russia, on the other hand, has a major control on palladium, platinum group metals and nickel, as well some of the agricultural fertilizers, such as potash. Russia also has a critical supply of uranium; it produces about 3,000 tons of uranium, close to double United States production of uranium. Not only that, but Russia has strategic ties with Kazakhstan, which produces close to 20,000 tons of uranium—over 36% of global supply.

I’ve written for years that these metals and these materials are at risk of critical supply shortfall. It’s even more the case now as these tensions increase. There is greater risk of China or Russia turning off the natural gas pipelines or cutting exports of the rare earths and graphite.

Their control of these critical metals is going to force the West, the European Union and the U.S. to develop their own strategic, secure supplies of these materials needed for the critical technologies.

Another angle: In times of war and tension and geopolitical crises, commodities are often a very good hedge against inflationary price rises. We’re already seeing outsized gains in the commodity sectors in 2014. The smart money may be already positioned for the black swans we are currently observing.

TMR: China is a major buyer of uranium. How do the tensions there affect business conditions in the uranium market?

JH: China is building more nuclear reactors than ever before, and over the next 10 years it’s going to need a major increase in its supply of uranium. Uranium is one of the few materials that China is not self-sufficient in. Unlike the rare earths, it’s going to have to look abroad for that.

China has already tried to go into Africa, which is also one of the largest suppliers of uranium: Niger and Namibia together produce about 14% of global uranium supply, but those areas are not so stable. Last year, AREVA SA’s (AREVA:EPA) Niger uranium facility was the target of an Al-Qaeda terrorist attack, a double-suicide bombing that shut down the plant....

We believe that the Chinese trade agreement with the Canadians, Cameco Corp. (CCO:TSX; CCJ:NYSE), is critical. McArthur River in the Athabasca Basin is the world’s largest high-grade uranium mine. Canada provides about 17% of global supply. This is second only to Kazakhstan, but the Athabasca Basin is going to be able to cover the supply gap that may be coming. There are huge discoveries there, with the highest-grade uranium deposits; concentration is more than 100 times the global average. There are other areas within North America with significant resources, such as the Elliott Lake region in Ontario, where Pele Mountain is operating. Meanwhile, companies are coming into production in Wyoming. And there are a lot of uranium assets in Utah and New Mexico, which may benefit from a bounce in the depressed uranium spot price. We think that the U.S. and Canada over the coming years are going to increase production to alleviate the supply shortfall that may be coming from unstable areas.

TMR: Can companies like Uranerz Energy Corp. (URZ:TSX; URZ:NYSE.MKT) and Laramide Resources Ltd. (LAM:TSX; LAM:ASX) afford to begin production in their new mines with uranium prices stuck where they are?

“Uranerz Energy Corp.already has offtake agreements at higher uranium prices.“

JH: Uranerz already has offtake agreements at higher uranium prices. It can afford to begin production. Laramide is still a few years away from production in Australia, which has reversed the uranium ban. The uranium price may be depressed now, but investors realize the price could be significantly higher in two to three years. Uranerz is an in-situ mine so it’s lower cost. It can afford to begin production now because it has offtake agreements. We don’t think uranium prices are going to stick around where they are for much longer. Japan is slowly restarting its reactors. The Russian HEU Agreement has come to an end. There are more reactors being built today than ever before. We think the uranium spot prices are going to reverse higher making an astonishing move.

Right now, you can get in at eight-year lows on the top uranium assets that are in the control of the juniors. Uranerz Energy has some of the top assets in the Powder River Basin that are coming into production, and Laramide has one of the top resources with over 50 million pounds (50 Mlb) near surface in Australia, which has now overturned a ban on uranium mining in the district. Now Laramide can go ahead with that Westmoreland project.

Laramide has one of the top advanced resources that provides huge leverage for an investor for the uranium price. For investors who are looking for leverage and for advanced assets, Laramide is a good candidate. There are very few candidates in the junior sector that have 100% control of such a large asset. Investors must realize that there are so few high-quality junior uranium miners. When investors and funds return, the move could be dramatic—like an elephant trying to get through the eye of a needle.

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http://etfdailynews.com/2014/03/18/china-is-buying-up-uranium/


All this compares to WHE world class Pecs licence, which holds 65 million pounds of U308 whereas the Hungarian governments MML-E licence holds an additional 12 million pounds of U308, giving a total of 77 Mlb.

Making it the largest uranium prospect in the EU.

"When investors and funds return, the move could be dramatic—like an elephant trying to get through the eye of a needle."

News soon

GLA