contrarians: uranium a buy!, page-2

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/3/17_Rick_Rule_-_One_of_the_Speculative_Opportunities_of_the_Decade.html


Rick Rule - One of the Speculative Opportunities of the Decade

With gold and silver consolidating and the Japanese tragedy still unfolding, today King World News interviewed Rick Rule, Founder of Global Resource Investor which is now part of the $8 billion Sprott Asset Management. KWN wanted to get Rick?s take on gold, silver and how the Japanese situation will impact the uranium market. When asked about recent selling in gold Rule commented, ?From the look of the markets right now it got soaked up very, very handily, so I suspect you are seeing a continuing pattern of gold going from relatively weak hands to relatively strong hands which to me is very bullish.?


When asked about silver specifically Rule remarked, ?Dollar demand for silver is outpacing dollar demand for gold. I keep hearing that there could be problems in near term futures delivery, that is more metals stood for physical delivery than the market has the ability to produce. Certainly the events of the last 90 or 120 days in terms of physical metal being withdrawn from the market has impacted the ability of mints like the Royal Canadian Mint and the US Mint to buy silver strip or coin stock. So you?re seeing the inability of dealers to get as much silver coin or silver bar as buyers have demanded.?


Moving on to uranium Rule stated, ?It?s too early to say what?s going to happen in Japan with regards to a compound series of tragedies...As a consequence of people?s memories of Hiroshima, Nagasaki, Chernobyl, Three Mile Island, the emotion surrounding the incident obscures many of the facts surround the incident.?


When asked how the uranium sector going forward will be impacted by the Japanese tragedy Rule commented, ?Well in my thesis on a worldwide demand basis, I don?t think it?s going to be particularly important. Let?s look at a market that uses a fair bit of uranium that is likely to be socially and politically impacted, the United States. 19% or 20% of US electrical supply is from uranium.


If we decided to shut down our existing nuclear plants the lights would go out Eric. That?s what would happen, the lights would go out, not going to happen. It is likely that as a consequence of what we saw in Japan, that new build nuclear power plants in the United States will be extensively delayed as a political consequence of what happened in Japan. But in terms of impacting systemic demand, demand from existing plants, I see absolutely no impact whatsoever.


When asked about the Chinese putting plants on hold while a study is conducted Rule remarked, ?My suspicion is that what is happening in China is a political statement. There is panic in the far east about the possibility of a nuclear plume which could spread from Japan and impact China. My suspicion is that the Chinese spend 90 or 120 days quote studying the situation. And as a consequence of their quote study, when the panic dies down, the Chinese announce something like the following:


Japanese nuclear power plants are 35 or 40 years old, the Chinese plants are new build, using much better, much safer technology. Second, the Japanese plants are built on tectonic plates prone to earthquakes and tsunamis. The Chinese plants are built on Precambrian continental rock that isn?t faulted and isn?t subjected to either tidal waves or earthquakes. Ergo, Japanese plants were faulty, Chinese plants are safe, full speed ahead.


When asked about uranium equities Rule stated, ?What?s interesting about uranium and nuclear power is that the reaction to it is so emotional....But I suspect that people who have a speculative bent, particularly like yourself and myself, who have an orientation towards contrarian speculation will come to regard this possibly as one of the best speculative opportunities of the decade.?


Rick Rule knows how I think...Today I opened up an initial position in a high quality uranium explorer. The fact is the situation may get much worse before it gets better, so if that is the case I will buy more on further declines. I hope the situation in Japan improves, but no matter what direction it goes I just don?t think the world can service its energy needs going forward without nuclear power plants and that means the world will need uranium.


Eric King